earliest year must include a statement that identifies the location in
the prior filing where the omitted discussion may be found. An emerging
growth company, as defined in Rule 405 of the Securities Act (Sec.
230.405 of this chapter) or Rule 12b-2 of the Exchange Act (Sec.
240.12b-2 of this chapter), may provide the discussion required in
paragraph (b) of this section for its two most recent fiscal years if,
pursuant to Section 7(a) of the Securities Act of 1933 (15 U.S.C.
77g(a)), it provides audited financial statements for two years in a
Securities Act registration statement for the initial public offering
of the emerging growth company's common equity securities.
    2. Discussions of liquidity and capital resources may be combined
whenever the two topics are interrelated.
    3. If the reasons underlying a material change in one line item in
the financial statements also relate to other line items, no repetition
of such reasons in the discussion is required and a line-by-line
analysis of the financial statements as a whole is not required or
generally appropriate. Registrants need not recite the amounts of
changes from period to period which are readily computable from the
financial statements. The discussion must not merely repeat numerical
data contained in the financial statements.
    4. The term ``liquidity'' as used in this Item refers to the
ability of an enterprise to generate adequate amounts of cash to meet
the enterprise's needs. Except where it is otherwise clear from the
discussion, the registrant must indicate those balance sheet conditions
or income or cash flow items which the registrant believes may be
indicators of its liquidity condition. Liquidity generally must be
discussed on both a long-term and short-term basis. The issue of
liquidity must be discussed in the context of the registrant's own
business or businesses. For example, a discussion of working capital
may be appropriate for certain manufacturing, industrial, or related
operations but might be inappropriate for a bank or public utility.
    5. Where financial statements presented or incorporated by
reference in the registration statement are required by Sec.  210.4-
08(e)(3) of Regulation S-X [17 CFR part 210] to include disclosure of
restrictions on the ability of both consolidated and unconsolidated
subsidiaries to transfer funds to the registrant in the form of cash
dividends, loans or advances, the discussion of liquidity must include
a discussion of the nature and extent of such restrictions and the
impact such restrictions have had or are expected to have on the
ability of the parent company to meet its cash obligations.
    6. Any forward-looking information supplied is expressly covered by
the safe harbor rule for projections. See Rule 175 under the Securities
Act [17 CFR 230.175 ], Rule 3b-6 under the Exchange Act [17 CFR 240.3b-
6], and Securities Act Release No. 6084 (June 25, 1979) (44 FR 33810).
    7. All references to the registrant in the discussion and in this
Item mean the registrant and its subsidiaries consolidated.
    8. Discussion of commitments or obligations, including contingent
obligations, arising from arrangements with unconsolidated entities or
persons that have or are reasonably likely to have a material current
or future effect on a registrant's financial condition, changes in
financial condition, revenues or expenses, results of operations,
liquidity, cash requirements or capital resources must be provided even
when the arrangement results in no obligations being reported in the
registrant's consolidated balance sheets. Such off-balance sheet
arrangements may include: Guarantees; retained or contingent interests
in assets transferred; contractual arrangements that support the
credit, liquidity or market risk for transferred assets; obligations
that arise or could arise from variable interests held in an
unconsolidated entity; or obligations related to derivative instruments
that are both indexed to and classified in a registrant's own equity
under U. S. GAAP.
    9. If the registrant is a foreign private issuer, briefly discuss
any pertinent governmental economic, fiscal, monetary, or political
policies or factors that have materially affected or could materially
affect, directly or indirectly, their operations or investments by
United States nationals. The discussion must also consider the impact
of hyperinflation if hyperinflation has occurred in any of the periods
for which audited financial statements or unaudited interim financial
statements are filed. See Rule 3-20(c) of Regulation S-X for a
discussion of cumulative inflation rates that may trigger this
requirement.
    10. If the registrant is a foreign private issuer, the discussion
must focus on the primary financial statements presented in the
registration statement or report. The foreign private issuer must refer
to the reconciliation to United States generally accepted accounting
principles and discuss any aspects of the difference between foreign
and United States generally accepted accounting principles, not
discussed in the reconciliation, that the registrant believes is
necessary for an understanding of the financial statements as a whole,
if applicable.
    11. The term statement of comprehensive income means a statement of
comprehensive income as defined in Sec.  210.1-02 of Regulation S-X.
    Instruction to paragraph 303(b)(4): The disclosure of critical
accounting estimates should supplement, but not duplicate, the
description of accounting policies or other disclosures in the notes to
the financial statements.
    (c) Interim periods. If interim period financial statements are
included or are required to be included by Article 3 of Regulation S-X
[17 CFR 210.3], a management's discussion and analysis of the financial
condition and results of operations must be provided so as to enable
the reader to assess material changes in financial condition and
results of operations between the periods specified in paragraphs
(c)(1) and (2) of this section. The discussion and analysis must
include a discussion of material changes in those items specifically
listed in paragraph (b) of this section.
    (1) Material changes in financial condition. Discuss any material
changes in financial condition from the end of the preceding fiscal
year to the date of the most recent interim balance sheet provided. If
the interim financial statements include an interim balance sheet as of
the corresponding interim date of the preceding fiscal year, any
material changes in financial condition from that date to the date of
the most recent interim balance sheet provided also must be discussed.
If discussions of changes from both the end and the corresponding
interim date of the preceding fiscal year are required, the discussions
may be combined at the discretion of the registrant.
    (2) Material changes in results of operations. (i) Discuss any
material changes in the registrant's results of operations with respect
to the most recent fiscal year-to-date period for which a statement of
comprehensive income is provided and the corresponding year-to-date
period of the preceding fiscal year.

    (ii) Discuss any material changes in the registrant's results of
operations with respect to either the most recent quarter for which a
statement of comprehensive income is provided and the corresponding
quarter for the preceding fiscal year or, in the alternative, the most
recent quarter for which a statement of comprehensive income is
provided and the immediately preceding sequential quarter. If the
latter immediately preceding sequential quarter is discussed, then
provide in summary form the financial information for that immediately
preceding sequential quarter that is subject of the discussion or
identify the registrant's prior filings on EDGAR that present such
information. If there is a change in the form of presentation from
period to period that forms the basis of comparison from previous
periods provided pursuant to this paragraph, the registrant must
discuss the reasons for changing the basis of comparison and provide
both comparisons in the first filing in which the change is made.
    Instructions to paragraph 303(c):
    1. If interim financial statements are presented together with
financial statements for full fiscal years, the discussion of the
interim financial information must be prepared pursuant to this
paragraph (c) and the discussion of the full fiscal year's information
must be prepared pursuant to paragraph (b) of this section. Such
discussions may be combined. Instructions 3, 6, 8 and 11 to paragraph
(b) of this section apply to this paragraph (c).
    2. The registrant's discussion of material changes in results of
operations must identify any significant elements of the registrant's
income or loss from continuing operations which do not arise from or
are not necessarily representative of the registrant's ongoing
business.
0
7. Amend Sec.  229.914 by revising paragraph (a) to read as follows:

Sec.  229.914  (Item 914) Pro forma financial statements: Selected
financial data.

    (a) For each partnership proposed to be included in a roll-up
transaction provide: Ratio of earnings to fixed charges, cash and cash
equivalents, total assets at book value, total assets at the value
assigned for purposes of the roll-up transaction (if applicable), total
liabilities, general and limited partners' equity, net increase
(decrease) in cash and cash equivalents, net cash provided by operating
activities, distributions; and per unit data for net income (loss),
book value, value assigned for purposes of the roll-up transaction (if
applicable), and distributions (separately identifying distributions
that represent a return of capital). This information must be provided
for the previous two fiscal years. Additional or other information must
be provided if material to an understanding of each partnership
proposed to be included in a roll-up transaction.
* * * * *
0
8. Amend Sec.  229.1112 by revising paragraph (b)(1) and Instruction
3.a. to paragraph (b) to read as follows:

Sec.  229.1112  (Item 1112) Significant obligors of pool assets.

* * * * *
    (b) Financial information. (1) If the pool assets relating to a
significant obligor represent 10% or more, but less than 20%, of the
asset pool, provide summarized financial information, as defined by
Rule 1-02(bb) of Regulation S-X (Sec.  210.1-02(bb) of this chapter),
for the significant obligor for each of the last three fiscal years (or
the life of the significant obligor and its predecessors, if less),
provided, however, that for a significant obligor under Sec.
229.1101(k)(2) of this chapter (Item 1101(k)(2) of Regulation AB), only
net operating income for the most recent fiscal year and interim period
is required.
* * * * *
    Instructions to Item 1112(b):
* * * * *
    3. * * *
    a. If the summarized financial information required by paragraph
(b)(1) of this section is presented on a basis of accounting other than
U.S. GAAP or IFRS as issued by the IASB, then present a reconciliation
to U.S. GAAP and Regulation S-X, pursuant to Item 17 of Form 20-F. If a
reconciliation is unavailable or not obtainable without unreasonable
cost or expense, at a minimum provide a narrative description of all
material variations in accounting principles, practices and methods
used in preparing the non-U.S. GAAP financial statements used as a
basis for the summarized financial information from those accepted in
the U.S.
* * * * *
0
9. Amend Sec.  229.1114 by revising paragraph (b)(2)(i) and Instruction
4.a. to paragraph (b) to read as follows:

Sec.  229.1114  (Item 1114) Credit enhancement and other support,
except for certain derivatives instruments.

* * * * *
    (b) * * *
    (2) Financial information. (i) If any entity or group of affiliated
entities providing enhancement or other support described in paragraph
(a) of this section is liable or contingently liable to provide
payments representing 10% or more, but less than 20%, of the cash flow
supporting any offered class of the asset-backed securities, provide
summarized financial information, as defined by Rule 1-02(bb) of
Regulation S-X (Sec.  210.1-02(bb) of this chapter), for each such
entity or group of affiliated entities for each of the last three
fiscal years (or the life of the entity or group of affiliated entities
and any predecessors, if less).
* * * * *
    Instruction 4 to Item 1114(b). * * *
    a. If the summarized financial information required by paragraph
(b)(1) of this section is presented on a basis of accounting other than
U.S. GAAP or IFRS as issued by the IASB, then present a reconciliation
to U.S. GAAP and Regulation S-X, pursuant to Item 17 of Form 20-F. If a
reconciliation is unavailable or not obtainable without unreasonable
cost or expense, at a minimum provide a narrative description of all
material variations in accounting principles, practices and methods
used in preparing the non-U.S. GAAP financial statements used as a
basis for the summarized financial information from those accepted in
the U.S.
* * * * *
0
10. Amend Sec.  229.1115 by revising paragraph (b)(1) to read as
follows:

Sec.  229.1115   (Item 1115) Certain derivatives instruments.

* * * * *
    (b) Financial information. (1) If the aggregate significance
percentage related to any entity or group of affiliated entities
providing derivative instruments contemplated by this section is 10% or
more, but less than 20%, provide summarized financial information, as
defined by Rule 1-02(bb) of Regulation S-X (Sec.  210.1-02(bb) of this
chapter), for such entity or group of affiliated entities for each of
the last three fiscal years (or the life of the entity or group of
affiliated entities and any predecessors, if less).
* * * * *

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

0
11. The authority citation for part 239 continues to read in part as
follows:

    Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3,
77sss, 78c, 78l, 78m, 78n, 78o(d), 78o-7 note, 78u-5, 78w(a), 78ll,
78mm, 80a-2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24, 80a-26,
80a-29, 80a-30, and 80a-37; and sec. 107, Pub. L. 112-106, 126 Stat.
312, unless otherwise noted.
* * * * *

0
12. Amend Form S-1 (referenced in Sec.  239.11) by:
0
a. Revising paragraphs (f) and (g) of Instruction 1 under
``Instructions as to Summary Prospectus''; and
0
b. Adding paragraph (h) of Instruction 1 under ``Instructions as to
Summary Prospectus'' to read as follows:

    Note:  The text of Form S-1 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

INSTRUCTIONS AS TO SUMMARY PROSPECTUSES

    1. * * *
    (f) As to Item 11, a brief statement of the general character of
the business done and intended to be done and a brief statement of the
nature and present status of any material pending legal proceedings;
    (g) A tabular presentation of notes payable, long term debt,
deferred credits, minority interests, if material, and the equity
section of the latest balance sheet filed, as may be appropriate; and
    (h) Subject to appropriate variation to conform to the nature of
the registrant's business, provide summarized financial information
defined by Rule 1-02(bb)(1)(i) and (ii) of Regulation S-X (Sec.  210.1-
02(bb) of this chapter) in comparative columnar form for the periods
for which financial statements are required by Regulation S-X (17 CFR
part 210).
* * * * *
0
13. Amend Form S-20 (referenced in Sec.  239.20) by revising Item 7 and
paragraph (1) to Item 8 to read as follows:

    Note: The text of Form S-20 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM S-20

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

PART II INFORMATION NOT REQUIRED IN PROSPECTUS

* * * * *

Item 7. Financial Statements

    Include financial statements meeting the requirements of Regulation
S-X [17 CFR 210].

Item 8. Undertakings

    Furnish the following undertakings:
    1. The undersigned registrant hereby undertakes to file a post-
effective amendment, not later than 120 days after the end of each
fiscal year subsequent to that covered by the financial statements
presented herein, containing financial statements meeting the
requirements of Regulation S-X [17 CFR 210].
* * * * *
0
14. Amend Form S-4 (referenced in Sec.  239.25) by:
0
a. Removing and reserving Item 3(d), (e), and (f) and removing the
Instruction to Item 3(e) and (f) under Part I, Section A (``Information
About the Transaction''); and
0
b. Removing and reserving Item 17(b)(3) and (4) under Part I, Section C
(``Information with Respect to Companies Other Than S-3 Companies'').
0
15. Amend Form F-1 (referenced in Sec.  239.31) by:
0
a. Revising the paragraph 1(c)(v) under ``Instructions as to Summary
Prospectuses''; and
0
b. Adding paragraph 1(c)(vi) to read as follows:

    Note: The text of Form F-1 does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM F-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

INSTRUCTIONS AS TO SUMMARY PROSPECTUSES

    1. * * *
    (c) * * *
    (v) As to Item 4, a brief statement of the general character of the
business done and intended to be done and a brief statement of the
nature and present status of any material pending legal proceedings;
    (vi) Subject to appropriate variation to conform to the nature of
the registrant's business, provide summarized financial information
defined by Rule 1-02(bb)(1)(i) and (ii) of Regulation S-X (Sec.  210.1-
02(bb) of this chapter) in comparative columnar form for the periods
for which financial statements are required by Item 8.A. of Form 20-F.
If interim period financial statements are included, the summarized
financial information should be updated for that interim period, which
may be unaudited, provided that fact is stated. If summarized financial
data for interim periods is provided, comparative data from the same
period in the prior financial year shall also be provided, except that
the requirement for comparative balance sheet data is satisfied by
presenting the year end balance sheet information.
* * * * *
0
16. Amend Form F-4 (referenced in Sec.  239.34) by:
0
a. Removing and reserving Item 3(d), (e), and (f) and removing the
Instruction to Item 3(e) and (f) under Part I, Section A (``Information
About the Transaction''); and
0
b. Removing and reserving Item 17(b)(3) under Part I, Section C
(``Information with Respect to Foreign Companies Other Than F-3
Companies'').

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

0
17. The authority citation for part 240 continues to read in part as
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f,
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4,
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 78mm,
80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, and 7201 et
seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C.
1350; Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112-
106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted.
* * * * *

Sec.  240.14a-101   [Amended]

0
18. Amend Sec.  240.14a-101 by removing and reserving (b)(8), (9), and
(10) under Item 14 (``Mergers, consolidations, acquisitions and similar
matters''):

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
19. The authority citation for part 249 continues to read, in part, as
follows:

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C.
5461 et seq.; 18 U.S.C. 1350; Sec. 953(b), Pub. L. 111-203, 124
Stat. 1904; Sec. 102(a)(3), Pub. L. 112-106, 126 Stat. 309 (2012);
Sec. 107, Pub. L. 112-106, 126 Stat. 313 (2012), and Sec. 72001,
Pub. L. 114-94, 129 Stat. 1312 (2015), unless otherwise noted.
* * * * *
0
20. Amend Form 20-F (referenced in Sec.  249.220f) by:

0
a. Removing and reserving General Instruction G(c);
0
b. Removing and reserving Item 3.A;
0
c. Removing Instructions to Item 3.A;
0
d. Amending Item 5; and
0
e. Revising Instruction 3 of Instructions to Item 8.A.2 to remove the
final sentence, to read as follows:

    Note: The text of Form 20-F does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 20-F

* * * * *

Item 5. Operating and Financial Review and Prospects

    The purpose of this standard is to provide management's explanation
of factors that have materially affected the company's financial
condition and results of operations for the historical periods covered
by the financial statements, and management's assessment of factors and
trends which are anticipated to have a material effect on the company's
financial condition and results of operations in future periods. This
discussion and analysis must provide a narrative explanation of the
registrant's financial statements that allows investors to view the
registrant from management's perspective.
    Discuss the company's financial condition, changes in financial
condition and results of operations for each year and interim period
for which financial statements are required. The discussion must
include a quantitative and qualitative description of the reasons
underlying material changes, including where material changes within a
line item offset one another, to the extent necessary for an
understanding of the company's business as a whole. Information
provided also must relate to all separate segments and/or other
subdivisions (e.g., geographic areas, product lines) of the company.
The discussion must include other statistical data that the company
believes will enhance a reader's understanding of the company's
financial condition, changes in financial condition, and results of
operations. The discussion and analysis must also focus specifically on
material events and uncertainties known to management that would cause
reported financial information not to be necessarily indicative of
future operating results or of future financial condition. Provide the
information specified below as well as such other information that is
necessary for an investor's understanding of the company's financial
condition, changes in financial condition and results of operations.
    A. Operating results. Provide information regarding significant
factors, including unusual or infrequent events or new developments,
materially affecting the company's income from operations, indicating
the extent to which income was so affected. Describe any other
significant component of revenue or expenses necessary to understand
the company's results of operations.
    1. If the statement of comprehensive income presents material
changes from period to period in net sales or revenue, if applicable,
describe the extent to which such changes are attributable to changes
in prices or to changes in the volume or amount of products or services
being sold or to the introduction of new products or services.
    2. If the currency in which financial statements are presented is
of a country that has experienced hyperinflation, the existence of such
inflation, a five year history of the annual rate of inflation and a
discussion of the impact of hyperinflation on the company's business
must be disclosed.
    3. Provide information regarding the impact of foreign currency
fluctuations on the company, if material, and the extent to which
foreign currency net investments are hedged by currency borrowings and
other hedging instruments.
    4. Provide information regarding any governmental economic, fiscal,
monetary or political policies or factors that have materially
affected, or could materially affect, directly or indirectly, the
company's operations or investments by host country shareholders.
    B. Liquidity and capital resources. The following information must
be provided:
    1. Information regarding the company's liquidity (both short and
long term), including:
    (a) A description of the internal and external sources of liquidity
and a brief discussion of any material unused sources of liquidity.
Include a statement by the company that, in its opinion, the working
capital is sufficient for the company's present requirements, or, if
not, how it proposes to provide the additional working capital needed.
    (b) an evaluation of the sources and amounts of the company's cash
flows, including the nature and extent of any legal or economic
restrictions on the ability of subsidiaries to transfer funds to the
company in the form of cash dividends, loans or advances and the impact
such restrictions have had or are expected to have on the ability of
the company to meet its cash obligations.
    2. Information regarding the type of financial instruments used,
the maturity profile of debt, currency and interest rate structure. The
discussion also must include funding and treasury policies and
objectives in terms of the manner in which treasury activities are
controlled, the currencies in which cash and cash equivalents are held,
the extent to which borrowings are at fixed rates, and the use of
financial instruments for hedging purposes.
    3. Information regarding the company's material cash requirements,
including commitments for capital expenditures, as of the end of the
latest financial year and any subsequent interim period and an
indication of the general purpose of such requirements and the
anticipated sources of funds needed to satisfy such requirements.
    C. Research and development, patents and licenses, etc. Provide a
description of the company's research and development policies for the
last three years.
    D. Trend information. The company must identify material recent
trends in production, sales and inventory, the state of the order book
and costs and selling prices since the latest financial year. The
company also must discuss, for at least the current financial year, any
known trends, uncertainties, demands, commitments or events that are
reasonably likely to have a material effect on the company's net sales
or revenues, income from continuing operations, profitability,
liquidity or capital resources, or that would cause reported financial
information not necessarily to be indicative of future operating
results or financial condition.
    E. Critical Accounting Estimates.
    A registrant that does not apply in its primary financial
statements IFRS as issued by the IASB must discuss information about
its critical accounting estimates. This disclosure should supplement,
not duplicate, the description of accounting policies in the notes to
the financial statements.
    Critical accounting estimates. Critical accounting estimates are
those estimates made in accordance with generally accepted accounting
principles that involve a significant level of estimation uncertainty
and have had or are reasonably likely to have a material impact on
financial condition or results of operations. Discuss, to the extent
material, why each critical accounting estimate is subject to
uncertainty, how much each estimate has changed during the reporting
period, and the sensitivity of the reported amounts to the material

methods, assumptions and estimates underlying its calculation. The
discussion should provide quantitative as well as qualitative
information when quantitative information is reasonably available and
will provide material information to investors.
    Instructions to Item 5:
    1. Refer to the Commission's interpretive releases (No. 33-6835)
dated May 18, 1989, (No. 33-8056) dated January 22, 2002, (No. 33-8350)
dated Dec. 19, 2003, (No. 33-9144) dated September 17, 2010, and (No.
33-10751) dated January 30, 2020 for guidance in preparing this
discussion and analysis by management of the company's financial
condition and results of operations.
    2. The discussion must focus on the primary financial statements
presented in the document. You should refer to the reconciliation to
U.S. GAAP, if any, and discuss any aspects of the differences between
foreign and U.S. GAAP, not otherwise discussed in the reconciliation,
that you believe are necessary for an understanding of the financial
statements as a whole.
    3. We encourage you to supply forward-looking information, but that
type of information is not required. Forward-looking information is
covered expressly by the safe harbor provisions of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Forward-looking
information is different than presently known data which will have an
impact on future operating results, such as known future increases in
costs of labor or materials. You are required to disclose this latter
type of data if it is material.
    4. To the extent the primary financial statements reflect the use
of exceptions permitted or required by IFRS 1, the issuer must:
    a. Provide detailed information as to the exceptions used,
including:
    i. An indication of the items or class of items to which the
exception was applied; and
    ii. A description of what accounting principle was used and how it
was applied;
    b. Include, where material, qualitative disclosure of the impact on
financial condition, changes in financial condition and results of
operations that the treatment specified by IFRS would have had absent
the election to rely on the exception.
    5. An issuer filing financial statements that comply with IFRS as
issued by the IASB must, in providing information in response to
paragraphs of this Item 5 that refer to pronouncements of the FASB,
provide disclosure that satisfies the objective of the Item 5
disclosure requirements. In responding to this Item 5, an issuer need
not repeat information contained in financial statements that comply
with IFRS as issued by the IASB.
    6. Generally, the discussion must cover the periods covered by the
financial statements and the registrant may use any format that in the
registrant's judgment enhances a reader's understanding. For
registrants providing financial statements covering three years in a
filing, a discussion of the earliest of the three years may be omitted
if such discussion was already included in any other of the
registrant's prior filings on EDGAR that required disclosure in
compliance with Item 5 of Form 20-F, provided that registrants electing
not to include a discussion of the earliest year must include a
statement that identifies the location in the prior filing where the
omitted discussion may be found.
    7. Discussion of commitments or obligations, including contingent
obligations, arising from arrangements with unconsolidated entities or
persons that have or are reasonably likely to have a material current
or future effect on a registrant's financial condition, changes in
financial condition, revenues or expenses, results of operations,
liquidity, cash requirements or capital resources must be provided even
when the arrangement results in no obligations being reported in the
registrant's consolidated balance sheets. Such off-balance sheet
arrangements may include: Guarantees; retained or contingent interests
in assets transferred; contractual arrangements that support the
credit, liquidity or market risk for transferred assets; obligations
that arise or could arise from variable interests held in an
unconsolidated entity; or obligations related to derivative instruments
that are both indexed to and classified in a registrant's own equity,
or not reflected in the statement of financial position.
    Instruction to Item 5.A:
    1. You must provide the information required by Item 5.A.2 with
respect to hyperinflation if hyperinflation has occurred in any of the
periods for which you are required to provide audited financial
statements or unaudited interim financial statements in the document.
See Rule 3-20(c) of Regulation S-X for a discussion of cumulative
inflation rates that trigger this requirement.
* * * * *

Item 8. Financial Information

* * * * *
    Instructions to Item 8.A.2:
* * * * *
    In initial registration statements, if the financial statements
presented pursuant to Item 8.A.2 are prepared in accordance with U.S.
generally accepted accounting principles, the earliest of the three
years may be omitted if that information has not previously been
included in a filing made under the Securities Act of 1933 or the
Securities Exchange Act of 1934.
* * * * *
0
21. Amend Form 40-F (referenced in Sec.  249.240f) by:
0
a. Revising General Instruction B.(11) to read as follows;
0
b. Removing and reserving General Instructions B.(12) and (13); and
0
c. Removing the Instructions following General Instruction B.(13).

    Note: The text of Form 40-F does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 40-F

* * * * *

B. Information To Be Filed on This Form

* * * * *
    (11) Off-balance sheet arrangements. To the extent not discussed in
management's discussion and analysis that is provided pursuant to
General Instruction B.(3) of this form, discuss the commitments or
obligations, including continent obligations, arising from arrangements
with unconsolidated entities or persons that have or are reasonably
likely to have a material current or future effect on a registrant's
financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, cash requirements or
capital resources must be provided even when the arrangement results in
no obligations being reported in the registrant's consolidated balance
sheets. Such off-balance sheet arrangements may include: Guarantees;
retained or contingent interests in assets transferred; contractual
arrangements that support the credit, liquidity or market risk for
transferred assets; obligations that arise or could arise from variable
interests held in an unconsolidated entity; or obligations related to
derivative instruments that are both indexed to and classified in a
registrant's own equity, or not reflected in the statement of financial
position.
* * * * *
0
22. Amend Form 8-K (referenced in Sec.  249.308) by revising Item
2.03(c)(1)

through(3) and 2.03(d) to read as follows:

    Note: The text of Form 8-K does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

* * * * *

INFORMATION TO BE INCLUDED IN THE REPORT

* * * * *

Item 2.03 Creation of a Direct Financial Obligation or an Obligation
Under an Off-Balance Sheet Arrangement of a Registrant.

* * * * *
    (c) For purposes of this Item 2.03, direct financial obligation
means any of the following:
    (1) A long-term debt obligation means a payment obligation under
long-term borrowings referenced in FASB ASC paragraph 470-10-50-1 (Debt
Topic), as may be modified or supplemented);
    (2) a capital lease obligation means a payment obligation under a
lease classified as a capital lease pursuant to FASB ASC Topic 840,
Leases, as may be modified or supplemented;
    (3) an operating lease obligation means a payment obligation under
a lease classified as an operating lease and disclosed pursuant to FASB
ASC Topic 840, as may be modified or supplemented; or
    (4) a short-term debt obligation that arises other than in the
ordinary course of business.
    (d) For purposes of this Item 2.03, off-balance sheet arrangement
means any transaction, agreement or other contractual arrangement to
which an entity unconsolidated with the registrant is a party, under
which the registrant has:
    (1) Any obligation under a guarantee contract that has any of the
characteristics identified in FASB ASC paragraph 460-10-15-4
(Guarantees Topic), as may be modified or supplemented, and that is not
excluded from the initial recognition and measurement provisions of
FASB ASC paragraphs 460-10-15-7, 460-10-25-1, and 460-10-30-1.
    (2) A retained or contingent interest in assets transferred to an
unconsolidated entity or similar arrangement that serves as credit,
liquidity or market risk support to such entity for such assets;
    (3) Any obligation, including a contingent obligation, under a
contract that would be accounted for as a derivative instrument, except
that it is both indexed to the registrant's own stock and classified in
stockholders' equity in the registrant's statement of financial
position, and therefore excluded from the scope of FASB ASC Topic 815,
Derivatives and Hedging, pursuant to FASB ASC subparagraph 815-10-15-
74(a), as may be modified or supplemented; or
    (4) Any obligation, including a contingent obligation, arising out
of a variable interest (as defined in the FASB ASC Master Glossary), as
may be modified or supplemented in an unconsolidated entity that is
held by, and material to, the registrant, where such entity provides
financing, liquidity, market risk or credit risk support to, or engages
in leasing, hedging or research and development services with, the
registrant.
* * * * *

    By the Commission.

    Dated: January 30, 2020.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2020-02313 Filed 2-27-20; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 84, Number 77 (Monday, April 22, 2019)]
[Notices]
[Pages 16730-16736]
[FR Doc No: 2019-07988]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85662; File No. SR-NASDAQ-2019-029]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Exchange's Pricing Schedule in Options 7, Section 2

April 16, 2019.
    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 April 10, 2019, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the 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 Substance
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's Pricing Schedule in
Options 7, Section 2, which governs the pricing for Nasdaq participants
using The Nasdaq Options Market (``NOM''), Nasdaq's facility for
executing and routing standardized equity and index options. The
proposed changes are described further below.
    The text of the proposed rule change is available on the Exchange's
website 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
    The Exchange proposes a number of changes to NOM pricing in Options
7, Section 2. Each change is discussed below.
    The Exchange initially filed the proposed pricing changes on April
1, 2019 (SR-NASDAQ-2019-025). On April 10, 2019, the Exchange withdrew
that filing and submitted this filing.
Customer and Professional Fee for Removing Liquidity in Penny Pilot
Options
    The Exchange currently charges Participants a Penny Pilot Options
Fee for Removing Customer \3\ or Professional \4\ Liquidity that is
$0.50 per contract, excluding SPY. For Participants that remove
Customer or Professional liquidity in SPY, this fee is reduced to $0.49
per contract.\5\ The Exchange also offers a reduced $0.48 per contract
Customer or Professional Penny Pilot Options Fee for Removing Liquidity
for Participants that qualify for any MARS \6\ Payment Tier in Section
(6). SPY is excluded from this discount because Participants are
already offered the $0.49 per contract discounted fee for SPY.
---------------------------------------------------------------------------

    \3\ The term ``Customer'' or (``C'') applies to any transaction
that is identified by a Participant for clearing in the Customer
range at The Options Clearing Corporation (``OCC'') which is not for
the account of broker or dealer or for the account of a
``Professional'' (as that term is defined in Chapter I, Section
1(a)(48)).
    \4\ The term ``Professional'' or (``P'') means any person or
entity that (i) is not a broker or dealer in securities, and (ii)
places more than 390 orders in listed options per day on average
during a calendar month for its own beneficial account(s) pursuant
to Chapter I, Section 1(a)(48). All Professional orders shall be
appropriately marked by Participants.
    \5\ See Options 7, Section 2(1), note 3. Firms, Non-NOM Market
Makers, NOM Market Makers and Broker-Dealers are assessed a $0.50
per contract Penny Pilot Options Fee for Removing Liquidity in SPY,
similar to other Penny Pilot Options.
    \6\ ``MARS'' is the Market Access and Routing Subsidy program,
which offers rebates to Participants that have System Eligibility
and have executed the requisite number of Eligible Contracts in a
month. See Options 7, Section 2(6).
---------------------------------------------------------------------------

    The Exchange now proposes to eliminate both discounts, and instead
charge a flat fee of $0.48 per contract (reduced from $0.50 per
contract) for each Customer or Professional transaction which removes
liquidity in Penny Pilot Options, including SPY. The Exchange is making
this change to simplify the operation of the Penny Pilot Options Fee to
Remove Customer and Professional Liquidity.
Customer and Professional Rebate To Add Liquidity in Penny Pilot
Options
    The Exchange proposes a number of changes to the Customer and
Professional Rebates to Add Liquidity in Penny Pilot Options set forth
in Section 2(1). First, the Exchange is proposing to increase certain
volume thresholds in the Tier 5 and Tier 6 Customer and Professional
Rebates to Add Liquidity in Penny Pilot Options. Today, the Exchange
offers the following Customer and Professional Rebates to Add Liquidity
in Penny Pilot Options, which are structured as a six tier program with
increasing volume requirements for each tier:

------------------------------------------------------------------------
                                                           Rebate to add
 Monthly  volume                                             liquidity
------------------------------------------------------------------------
Tier 1...........  Participant adds Customer,                      $0.20
                    Professional, Firm, Non-NOM Market
                    Maker and/or Broker-Dealer liquidity
                    in Penny Pilot Options and/or Non-
                    Penny Pilot Options of up to 0.10%
                    of total industry customer equity
                    and ETF option average daily volume
                    (``ADV'') contracts per day in a
                    month.
Tier 2...........  Participant adds Customer,                       0.25
                    Professional, Firm, Non-NOM Market
                    Maker and/or Broker-Dealer liquidity
                    in Penny Pilot Options and/or Non-
                    Penny Pilot Options above 0.10% to
                    0.20% of total industry customer
                    equity and ETF option ADV contracts
                    per day in a month.
Tier 3...........  Participant adds Customer,                       0.42
                    Professional, Firm, Non-NOM Market
                    Maker and/or Broker-Dealer liquidity
                    in Penny Pilot Options and/or Non-
                    Penny Pilot Options above 0.20% to
                    0.30% of total industry customer
                    equity and ETF option ADV contracts
                    per day in a month.
Tier 4...........  Participant adds Customer,                       0.43
                    Professional, Firm, Non-NOM Market
                    Maker and/or Broker-Dealer liquidity
                    in Penny Pilot Options and/or Non-
                    Penny Pilot Options above 0.30% to
                    0.40% of total industry customer
                    equity and ETF option ADV contracts
                    per day in a month.
Tier 5...........  Participant adds Customer,                       0.45
                    Professional, Firm, Non-NOM Market
                    Maker and/or Broker-Dealer liquidity
                    in Penny Pilot Options and/or Non-
                    Penny Pilot Options above 0.40% to
                    0.75% of total industry customer
                    equity and ETF option ADV contracts
                    per day in a month.
Tier 6...........  Participant adds Customer,                       0.48
                    Professional, Firm, Non-NOM Market
                    Maker and/or Broker-Dealer liquidity
                    in Penny Pilot Options and/or Non-
                    Penny Pilot Options above 0.75% or
                    more of total industry customer
                    equity and ETF option ADV contracts
                    per day in a month, or Participant
                    adds: (1) Customer and/or
                    Professional liquidity in Penny
                    Pilot Options and/or Non-Penny Pilot
                    Options of 0.20% or more of total
                    industry customer equity and ETF
                    option ADV contracts per day in a
                    month, and (2) has added liquidity
                    in all securities through one or
                    more of its Nasdaq Market Center
                    MPIDs that represent 1.00% or more
                    of Consolidated Volume in a month or
                    qualifies for MARS.
------------------------------------------------------------------------

    The Exchange first proposes to amend the criteria in Tier 5 to
increase the percentage of total industry customer equity and ETF
option ADV contracts per day in a month from 0.75% to 0.80%, and to
make a corresponding change in Tier 6 to increase the percentage from
0.75% to 0.80%. As proposed, Participants will receive a $0.45 per
contract Tier 5 rebate for adding Customer, Professional, Firm,\7\ Non-
NOM Market Maker \8\ and/or Broker-Dealer \9\ liquidity in Penny Pilot
Options and/or Non-Penny Pilot Options above 0.40% to 0.80% of total
industry customer equity and ETF option ADV contracts per day in a
month. In addition, Participants will receive a $0.48 per contract Tier
6 rebate for adding Customer, Professional, Firm, Non-NOM Market Maker
and/or Broker-Dealer liquidity in Penny Pilot Options and/or Non-Penny
Pilot Options above 0.80% or more of total industry customer equity and
ETF option ADV contracts per day in a month.\10\
---------------------------------------------------------------------------

    \7\ The term ``Firm'' or (``F'') applies to any transaction that
is identified by a Participant for clearing in the Firm range at
OCC.
    \8\ The term ``Non-NOM Market Maker'' or (``O'') is a registered
market maker on another options exchange that is not a NOM Market
Maker. A Non-NOM Market Maker must append the proper Non-NOM Market
Maker designation to orders routed to NOM.
    \9\ The term ``Broker-Dealer'' or (``B'') applies to any
transaction which is not subject to any of the other transaction
fees applicable within a particular category.
    \10\ The alternative method to earn the $0.48 per contract Tier
6 rebate described above is not being amended under this proposal.
---------------------------------------------------------------------------

    Further, the Exchange proposes to decrease the Customer and
Professional Rebate to Add Liquidity in Penny Pilot Options set forth
in note ``e'' of Section 2(1). Today, this rebate is $0.52 per contract
if the Participant transacts in all securities through one or more of
its Nasdaq Market Center MPIDs that represent 3.00% or more of
Consolidated Volume \11\ in the same month on The Nasdaq Stock Market.
Participants that qualify for this rebate would not be eligible for any
other

Customer and Professional rebates in Tiers 1-6 or other rebate
incentives on NOM for Customer and Professional order flow in Options
7, Section 2(1). The Exchange now proposes to reduce this Customer and
Professional Rebate to Add Liquidity in Penny Pilot Options from $0.52
to $0.50 per contract.
---------------------------------------------------------------------------

    \11\ Consolidated Volume would be determined as set forth in
Equity 7, Section 118(a). In calculating total volume, the Exchange
will add the Participant's total volume transacted on The Nasdaq
Stock Market in a given month across its Nasdaq Market Center MPIDs,
and will divide this number by the total industry Consolidated
Volume.
---------------------------------------------------------------------------

MARS Pricing
    The Exchange currently offers a Market Access and Routing Subsidy
or ``MARS'' to qualifying Participants in Options 7, Section 2(6).
Participants that have System Eligibility \12\ and have executed the
requisite number of Eligible Contracts \13\ daily in a month (``Average
Daily Volume'') are entitled to a MARS Payment. The Exchange currently
pays the following MARS Payments according to Average Daily Volume
(``ADV'') submitted on NOM:
---------------------------------------------------------------------------

    \12\ To qualify for MARS, the Participant's routing system
(``System'') would be required to: (1) Enable the electronic routing
of orders to all of the U.S. options exchanges, including NOM; (2)
provide current consolidated market data from the U.S. options
exchanges; and (3) be capable of interfacing with NOM's API to
access current NOM match engine functionality. Further, the
Participant's System would also need to cause NOM to be the one of
the top three default destination exchanges for (a) individually
executed marketable orders if NOM is at the national best bid or
offer (``NBBO''), regardless of size or time or (b) orders that
establish a new NBBO on NOM's Order Book, but allow any user to
manually override NOM as a default destination on an order-by-order
basis. Any NOM Participant would be permitted to avail itself of
this arrangement, provided that its order routing functionality
incorporates the features described above and satisfies NOM that it
appears to be robust and reliable. The Participant remains solely
responsible for implementing and operating its System.
    \13\ For the purpose of qualifying for the MARS Payment,
Eligible Contracts may include Firm, Non-NOM Market Maker, Broker-
Dealer, or Joint Back Office or ``JBO'' equity option orders that
add liquidity and are electronically delivered and executed.
Eligible Contracts do not include Mini Option orders.

------------------------------------------------------------------------
                          Average daily    MARS  payment   MARS  payment
         Tiers          volume (``ADV'')      (penny)       (non-penny)
------------------------------------------------------------------------
1.....................  2,000...........           $0.07           $0.15
2.....................  5,000...........            0.09            0.20
3.....................  10,000..........            0.11            0.30
4.....................  20,000..........            0.15            0.50
5.....................  45,000..........            0.17            0.60
------------------------------------------------------------------------

    The Exchange also provides Participants that qualify for the Tier 6
Customer and Professional Penny Pilot Options Rebate to Add Liquidity
in Section 2(1) an additional $0.09 per contract, which is paid in
addition to any MARS Payment tier on MARS Eligible Contracts the NOM
Participant qualifies for in a given month. The specified MARS Payments
are paid on all executed Eligible Contracts that add liquidity, which
are routed to NOM through a participating NOM Participant's System and
meet the requisite Eligible Contracts ADV. No payments will be made
with respect to orders that are routed to NOM, but not executed.\14\
---------------------------------------------------------------------------

    \14\ A Participant will not be entitled to receive any other
revenue for the use of its System specifically with respect to
orders routed to NOM.
---------------------------------------------------------------------------

    The Exchange now proposes to eliminate the additional $0.09 per
contract incentive provided to Participants that qualify for Customer
and Professional Penny Pilot Options Rebate to Add Liquidity Tier 6 for
the Non-Penny MARS Payment tiers. The Exchange will make related
changes within Section 2(6) to clarify that it will continue to pay an
additional $0.09 per contract in addition to any MARS Payment tier on
MARS Eligible Contracts in a given month on the Penny Pilot Options
transactions, provided the Participant qualified for the Customer and
Professional Penny Pilot Options Rebate to Add Liquidity Tier 6 in
Options 7, Section 2(1). The Exchange did not observe an appreciable
increase in Non-Penny Pilot order flow sent to the Exchange to qualify
for this rebate, and therefore proposes to eliminate this incentive to
apply its resources to other, possibly more effective incentives. As
such, the Exchange proposes to offer another incentive in lieu of the
eliminated rebate, which the Exchange will pay to qualifying
Participants on both Penny and Non-Penny Pilot Options transactions in
addition to any MARS Payment tier on MARS Eligible Contracts in a given
month. Specifically, the Exchange proposes to offer Participants that
have total Affiliated Entity \15\ or Common Ownership \16\ average
daily add volume (``ADAV'') of 3.00% or more of total industry customer
equity and ETF option ADV contracts per day in a month an additional
$0.01 per contract in Penny Pilot Options and an additional $0.03 per
contract in Non-Penny Pilot Options, in addition to any MARS Payment
tier on MARS Eligible Contracts the Participant qualifies for in a
given month.\17\ The Exchange believes that its proposal will encourage
Participants that are affiliated either under Common Ownership or as
Affiliated Entities to send additional order flow that add liquidity to
the Exchange to qualify for the higher MARS rebates.
---------------------------------------------------------------------------

    \15\ The term ``Affiliated Entity'' is a relationship between an
Appointed MM and an Appointed OFP for purposes of aggregating
eligible volume for pricing in Options 7, Sections 2(1) and 2(6) for
which a volume threshold or volume percentage is required to qualify
for higher rebates or lower fees. The term ``Appointed MM'' is a NOM
Market Maker who has been appointed by an Order Flow Provider
(``OFP'') for purposes of qualifying as an Affiliated Entity. An OFP
is a Participant, other than a NOM Market Maker, that submits
orders, as agent or principal, to the Exchange. The term ``Appointed
OFP'' is an OFP who has been appointed by a NOM Market Maker for
purposes of qualifying as an Affiliated Entity. Participants under
Common Ownership may not qualify as a counterparty comprising an
Affiliated Entity. Each Participant may qualify for only one (1)
Affiliated Entity relationship at any given time.
    \16\ The term ``Common Ownership'' shall mean Participants under
75% common ownership or control. Common Ownership shall apply to all
pricing in Options 7, Section 2 for which a volume threshold or
volume percentage is required to obtain the pricing.
    \17\ See proposed note ``[caret]'' in Section 2(6).
---------------------------------------------------------------------------

    The Exchange also proposes to provide Participants that qualify for
the Tier 5 MARS Payment two supplemental rebates that are based on
progressively increasing volume requirements of executed MARS Eligible
Contracts ADV and total Affiliated Entity or Common Ownership ADAV. The
Exchange believes that its proposal will encourage Participants to
bring additional order flow to the Exchange to qualify for the higher
MARS incentives. First, the Exchange proposes to offer Participants
that execute at least 75,000 of MARS Eligible Contracts per day and
have total Affiliated Entity or Common Ownership ADAV of 3.25% or more
of total industry customer equity and ETF option ADV contracts per day
in a month an additional $0.01 per contract in Penny Pilot Options and
an additional $0.10 per contract in Non-Penny Pilot Options, in
addition to MARS Payment Tier 5 on MARS

Eligible Contracts the Participant qualifies for in a given month.\18\
Second, Participants that execute at least 100,000 of MARS Eligible
Contracts per day and have total Affiliated Entity or Common Ownership
ADAV of 3.25% or more of total industry customer equity and ETF option
ADV contracts per day in a month will receive an additional $0.02 per
contract in Penny Pilot Options and an additional $0.19 per contract in
Non-Penny Pilot Options, in addition to MARS Payment Tier 5 on MARS
Eligible Contracts the NOM Participant qualifies for in a given
month.\19\ NOM Participants that qualify for this incentive will not
receive the proposed note ``@'' incentive.
---------------------------------------------------------------------------

    \18\ See proposed note ``@'' in Section 2(6).
    \19\ See proposed note ``&'' in Section 2(6).
---------------------------------------------------------------------------

NOM Market Maker Rebate To Add Liquidity in Non-Penny Pilot Options
    The Exchange currently offers Participants that qualify for the
Tier 6 NOM Market Maker Rebate to Add Liquidity in Penny Pilot Options
\20\ a $0.86 per contract NOM Market Maker Rebate to Add Liquidity in
Non-Penny Pilot options.\21\ This rebate is paid to qualifying
Participants in lieu of the $0.35 per contract fee normally charged to
NOM Market Maker transactions that add Non-Penny Pilot liquidity.\22\
The note ``6'' incentive is designed to encourage Participants that
transact as NOM Market Makers to send more order flow to the Exchange
in either Penny or Non-Penny Pilot Options in order to qualify for the
Tier 6 Penny Pilot Rebate to Add NOM Market Maker Liquidity to earn the
$0.86 Non-Penny Rebate to Add NOM Market Maker Liquidity. To further
incentivize Participants to direct order flow to NOM, the Exchange
proposes to provide an additional $0.02 per contract NOM Market Maker
Rebate to Add Liquidity in Non-Penny Pilot Options for Participants
that qualify for the note ``&'' incentive proposed above in the MARS
Payment Schedule, in addition to receiving the $0.86 per contract NOM
Market Maker Rebate to Add Liquidity in Non-Penny Pilot Options.
Participants would continue to receive the greater of the note ``5'' or
note ``6'' incentive if they qualify for both.
---------------------------------------------------------------------------

    \20\ To qualify for the Tier 6 rebate, Participant must: (a)(1)
Add NOM Market Maker liquidity in Penny Pilot Options and/or Non-
Penny Pilot Options above 0.95% of total industry customer equity
and ETF option ADV contracts per day in a month, (2) execute Total
Volume of 250,000 or more contracts per day in a month, of which
30,000 or more contracts per day in a month must be removing
liquidity, and (3) add Firm, Broker-Dealer and Non-NOM Market Maker
liquidity in Non-Penny Pilot Options of 10,000 or more contracts per
day in a month; or (b)(1) add NOM Market Maker liquidity in Penny
Pilot Options and/or Non-Penny Pilot Options above 1.50% of total
industry customer equity and ETF option ADV contracts per day in a
month, and (2) execute Total Volume of 250,000 or more contracts per
day in a month, of which 15,000 or more contracts per day in a month
must be removing liquidity. For purposes of Tier 6, ``Total Volume''
shall be defined as Customer, Professional, Firm, Broker-Dealer,
Non-NOM Market Maker and NOM Market Maker volume in Penny Pilot
Options and/or Non-Penny Pilot Options which either adds or removes
liquidity on NOM. See Options 7, Section 2(1).
    \21\ See Options 7, Section 2(1), note ``6.''
    \22\ The Exchange also offers additional incentives in note
``5'' to reduce this fee or earn a rebate, provided Participants
meet the volume-based requirements. Specifically, Participants who
add NOM Market Maker liquidity in Non-Penny Pilot Options of 7,500
to 9,999 ADV contracts per day in a month would be assessed a $0.00
per contract Non- Penny Options Fee for Adding Liquidity in that
month. In addition, Participants that add NOM Market Maker liquidity
in Non-Penny Pilot Options of 10,000 or more ADV contracts per day
in a month would receive a $0.30 per contract Non-Penny Rebate to
Add Liquidity for that month instead of paying the Non-Penny Fee for
Adding Liquidity. See Options 7, Section 2(1), note ``5.''
Participants that qualify for a note ``5'' incentive would receive
the greater of the note ``5'' or note ``6'' incentive.
---------------------------------------------------------------------------

NOM Market Maker Rebate To Add Liquidity in Penny Pilot Options
    Lastly, the Exchange proposes to replace VXX with VXXB in the Tiers
3 and 4 NOM Market Maker Rebates to Add Liquidity in Penny Pilot
Options which currently apply to AAPL, QQQ, IWM, SPY and VXX. By way of
background, options on the iPath S&P 500 VIX Short-Term Futures
exchange-traded note (``VXX'') are no longer listed for trading on the
Exchange since VXX matured on January 30, 2019 \23\ and VXX shares are
no longer listed for trading on equity trading venues. Prior to its
maturity, VXX's issuer Barclays Bank PLC introduced a substantially
similar product, the iPath Series B S&P 500 VIX Short-Term Futures
exchange-traded note (``VXXB''),\24\ and was intended to serve as the
replacement for VXX upon maturity. The Exchange has since listed VXXB
options for trading on NOM. Accordingly, the Exchange proposes to
replace references to VXX with VXXB in its Pricing Schedule. In
particular, the Exchange proposes to delete references to VXX from the
Tiers 3 and 4 NOM Market Maker Rebates to Add Liquidity in Penny Pilot
Options currently applicable to AAPL, QQQ, IWM, SPY and VXX, and
replace those with VXXB. The Tier 3 and Tier 4 rebates will otherwise
remain unchanged under this proposal.
---------------------------------------------------------------------------

    \23\ See VXX Prospectus and Pricing Supplement available at
http://www.ipathetn.com/US/16/en/documentation.app?instrumentId=259118&documentId=6204338.
    \24\ VXXB was introduced on January 17, 2018 and has a maturity
date of January 23, 2048. See VXXB Prospectus and Pricing Supplement
available at http://www.ipathetn.com/US/16/en/documentation.app?instrumentId=341408&documentId=6585610. While VXXB
is currently a Non-Penny Pilot Option, it will replace VXX in the
Penny Pilot Program as of April 2, 2019. See Options Trader Alert
#2019-8.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\25\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\26\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and issuers and other persons using any
facility, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f(b).
    \26\ 15 U.S.C. 78f(b)(4) and (5).
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Customer and Professional Fee for Removing Liquidity in Penny Pilot
Options
    The Exchange believes that the proposed changes to the Customer and
Professional Fees for Removing Liquidity in Penny Pilot Options are
reasonable. As discussed above, the Exchange is proposing to eliminate
the reduced fees of $0.49 per contract (provided to Participants that
remove Customer and Professional liquidity in SPY Options) and $0.48
per contract (provided to Participants that qualify for any MARS
Payment Tier). Instead, the Exchange will charge a flat fee of $0.48
per contract (reduced from $0.50 per contract) for each Customer or
Professional transaction which removes liquidity in Penny Pilot
Options, including SPY. The Exchange believes that these changes will
simplify the operation of this fee by uniformly charging $0.48 per
contract for all Customer and Professional transactions that remove
liquidity in Penny Pilot Options. Furthermore, the Exchange believes
that the fee decrease will further incentivize Participants to send
more Customer and Professional order flow to NOM. All market
participants benefit from the increased order interaction when more
order flow is available on NOM.
    The Exchange further believes that the proposed fee changes are
equitable and not unfairly discriminatory because they will apply
equally to all similarly situated Participants. With the proposed
changes, Participants will be charged a uniform $0.48 per contract Fee
for Removing Liquidity in all Penny Pilot Options, including SPY. The
Exchange also believes that it is equitable and not unfairly
discriminatory to offer the lower $0.48 per contract fee to
Participants that transact as Customers or Professionals, and not to
other market

participants. Customer liquidity offers unique benefits to the market
by providing more trading opportunities, which attracts specialists and
market makers. An increase in the activity of these market participants
in turn facilitates tighter spreads, which may cause a corresponding
increase in order flow from other market participants. The Exchange
believes that encouraging Participants to add Professional liquidity is
similarly beneficial, as the lower fee may cause market participants to
select NOM as a venue to send Professional order flow, which benefits
all market participants by attracting valuable liquidity to the market
and thereby enhancing the trading quality and efficiency of all.
Customer and Professional Rebate To Add Liquidity in Penny Pilot
Options
    The Exchange believes that it is reasonable to amend the Customer
and Professional Rebates to Add Liquidity in Penny Pilot Options by
increasing the percentages of total industry customer equity and ETF
option ADV contracts in Tiers 5 and 6, as discussed above. The Exchange
believes that the increased volume thresholds are more closely aligned
to the corresponding rebates than the current volume threshold. This
increase is also reflective of the Exchange's desire to provide
incentives to attract order flow to the Exchange in return for
significant market-improving behavior. By increasing the volume of
liquidity that a Participant must add during the month in order to
qualify for the corresponding Tier 5 and Tier 6 rebates, this change
will help ensure that Participants are providing significant market-
improving behavior in return for the incentives.
    In addition, the proposed change in note ``e'' to decrease the
Customer and Professional Rebate to Add Liquidity in Penny Pilot
Options provided to eligible Participants that transact 3.00% or more
in Consolidated Volume on The Nasdaq Stock Market from $0.52 to $0.50
per contract is reasonable because the proposed change is a modest
reduction, and the Exchange believes that its rebate program will
continue to incentivize Participants to transact greater volume on The
Nasdaq Stock Market in order to qualify for a higher rebate on NOM.
    The Exchange also believes that the modifications to the Customer
and Professional Rebates to Add Liquidity in Penny Pilot Options
proposed above are equitable and not unfairly discriminatory because
all eligible Participants that meet the relevant qualifications will
uniformly receive the rebates. Further, the Exchange believes that it
is equitable and not unfairly discriminatory to offer the rebates to
Participants that transact as Customers or Professionals, and not to
other market participants. Customer liquidity offers unique benefits to
the market by providing more trading opportunities, which attracts
specialists and market makers. An increase in the activity of these
market participants in turn facilitates tighter spreads, which may
cause an additional corresponding increase in order flow from other
market participants. The Exchange believes that encouraging
Participants to add Professional liquidity is similarly beneficial, as
the rebates may cause market participants to select NOM as a venue to
send Professional order flow, which benefits all market participants by
attracting valuable liquidity to the market and thereby enhancing the
trading quality and efficiency of all.
MARS Pricing
    The Exchange's proposal to modify MARS pricing in Section 2(6) is
reasonable, equitable and not unfairly discriminatory for the reasons
that follow.
    The Exchange believes that the elimination of the additional $0.09
per contract incentive for Non-Penny MARS Payment Tiers proposed above
is reasonable because as noted above, the Exchange did not observe an
appreciable increase in Non-Penny Pilot order flow sent to the Exchange
to qualify for this rebate. The Exchange must periodically assess the
effectiveness of the incentives it provides in the form of discounts or
rebates and, in the case of ineffective incentives, eliminate the
incentive so that the Exchange may apply its resources to other,
possibly more effective discounts or rebates such as the note
``[caret]'' incentive based on total Affiliated Entity or Common
Ownership proposed above. Accordingly, while the Exchange is
eliminating the additional $0.09 per contract incentive for Non-Penny
MARS Payment Tiers, the Exchange believes that the additional note
``[caret]'' incentives of $0.01 and $0.03 in Penny and Non-Penny Pilot
Options respectively, will better align the cost of the MARS program
with the benefit it brings to the marketplace.
    Furthermore, the Exchange believes that the proposed total
Affiliated Entity or Common Ownership ADAV requirement of 3.00% is
reasonable because it is set at a level that the Exchange believes will
encourage Participants to bring more order flow to the Exchange to
qualify for the higher note ``[caret]'' incentive. To the extent that
order flow is increased by the proposal, market participants will
increasingly compete for the opportunity to trade on the Exchange,
including sending more orders to reach higher tiers or rebates. The
resulting increased volume and liquidity will benefit all market
participants by providing more trading opportunities and tighter
spreads. The Exchange also notes that the concept of allowing market
participants to aggregate volume for purposes of volume pricing is not
novel. Other options markets have similar incentives in place to
attract volume to their markets.\27\
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    \27\ See Cboe Exchange (``CBOE'') Fees Schedule. CBOE permits
aggregation of volume to qualify for credits available under an
Affiliated Volume Plan or AVP. See NYSE American Options (``NYSE
Amex'') Fee Schedule at Section I.E. NYSE Amex permits aggregation
of volume to qualify for the Amex Customer Engagement or ACE
Program.
---------------------------------------------------------------------------

    The Exchange believes that the qualifying volume requirements in
the two additional incentives proposed in note ``@'' and note ``&'' of
Section 2(6) are reasonable and equitable for the same reasons
discussed above for the note ``[caret]'' incentive. Specifically, the
Exchange believes that the total Affiliated Entity or Common Ownership
ADAV requirement of 3.25% proposed for both incentives is set at an
appropriate level, which the Exchange believes will encourage
Participants to bring more order flow to the Exchange to qualify for
the higher note ``@'' and note ``&'' incentives, which liquidity will
benefit all market participants. The Exchange similarly believes that
the proposed MARS Eligible Contracts ADV requirements of 75,000 and
100,000 ADV for note ``@'' and note ``&,'' respectively, are reasonable
and equitable because they are set at levels that the Exchange believes
will encourage Participants and, in particular, Participants that
transact in Firm, Non-NOM Market Maker, Broker-Dealer, or JBO
electronic equity and ETF options orders that add liquidity to execute
more volume on NOM.
    The Exchange also believes that the proposed rebate amounts for the
note ``@'' and note ``&'' incentives reflect the progressively
increasing volume requirements to earn the highest MARS incentives by
bringing the most order flow to the Exchange. For instance,
Participants will have to meet the 3.25% total Affiliated Entity or
Common Ownership ADAV requirement and execute 75,000 of MARS Eligible
Contracts ADV, to qualify for the proposed ``@'' incentives and receive
the additional $0.01 per contract in Penny Pilot Options and the
additional $0.10 per contract in Non-Penny Pilot

Options.\28\ Participants that qualify for note ``@'' would therefore
receive total MARS rebates of $0.18 per contract for Penny Pilot
Options and $0.70 per contract for Non-Penny Pilot Options.
---------------------------------------------------------------------------

    \28\ The supplemental rebates would be paid in addition to the
Tier 5 MARS Payments of $0.17 per contract in Penny Pilot Options
and $0.60 per contract in Non-Penny Pilot Options.
---------------------------------------------------------------------------

    Furthermore, Participants will have to meet the 3.25% total
Affiliated Entity or Common Ownership ADAV requirement and execute
100,000 of MARS Eligible Contracts ADV, to qualify for the proposed
``&'' incentives and receive the additional $0.02 per contract in Penny
Pilot Options and the additional $0.19 per contract in Non-Penny Pilot
Options.\29\ Participants that qualify for note ``&'' would therefore
receive total MARS rebates of $0.19 per contract for Penny Pilot
Options and $0.79 per contract for Non-Penny Pilot Options. The
Exchange further believes that it is reasonable to not provide the note
``@'' incentives to Participants that qualify for the note ``&''
incentives. As noted above, the proposed note ``&'' incentives are
higher, and in some cases significantly higher, than the proposed
incentives in note ``@,'' and also require higher qualifying volume
thresholds. Accordingly, the Exchange believes it is reasonable to
provide the note ``@'' incentives instead of the note ``&'' incentives
to Participants that qualify for both.
---------------------------------------------------------------------------

    \29\ The supplemental rebates would be paid in addition to the
Tier 5 MARS Payments of $0.17 per contract in Penny Pilot Options
and $0.60 per contract in Non-Penny Pilot Options.
---------------------------------------------------------------------------

    The Exchange's proposal to modify MARS pricing in Section 2(6) is
equitable and not unfairly discriminatory because all Participants may
elect to become an Affiliated Entity as either Appointed MM or
Appointed OFP, or an affiliate under Common Ownership, for purposes of
aggregating eligible volume to qualify for higher rebates or lower
fees. Furthermore, any Participant may qualify for MARS provided they
have the requisite System Eligibility. The Exchange will also uniformly
pay MARS rebates to qualifying Participants on all Eligible Contracts.
NOM Market Maker Rebate To Add Liquidity in Non-Penny Pilot Options
    The Exchange believes that its proposal to provide an additional
$0.02 per contract NOM Market Maker Rebate to Add Liquidity in Non-
Penny Pilot Options for Participants that qualify for the note ``&''
incentive proposed above, in addition to receiving the $0.86 per
contract NOM Market Maker Rebate to Add Liquidity in Non-Penny Pilot
Options, is reasonable, equitable, and not unfairly discriminatory. The
Exchange notes that the additional incentive in note ``6'' will be the
highest available rebate (totaling $0.88 per contract) provided to
Participants that add NOM Market Maker liquidity in Non-Penny Pilot
Options. The Exchange believes that the additional incentive is
reasonable because it will require Participants to meet the stringent
volume requirements set forth in the note ``&'' incentive proposed
above, in addition to those set forth in the Tier 6 Penny Pilot Options
Rebate to Add NOM Market Maker Liquidity.\30\ The Exchange believes
that this incentive will continue to encourage Participants to bring
order flow to the Exchange to qualify for the higher rebate, which will
be beneficial for all market participants and will encourage an active
and liquidity market on NOM. The Exchange also believes that it is
reasonable to offer Participants that qualify for a note ``5''
incentive the greater of the current note ``5'' or new note ``6''
incentive because the Participant will be able to receive the greater
of the two rebates with this proposal.
---------------------------------------------------------------------------

    \30\ See note 22 above.
---------------------------------------------------------------------------

    The Exchange believes that the additional $0.02 per contract
incentive in note ``6'' is equitable and not unfairly discriminatory
because all similarly-situated Participants are equally capable of
qualifying for the proposed rebates, and the rebate will be uniformly
paid to all qualifying Participants. Further, the Exchange believes
that offering only Participants that transact as NOM Market Makers the
opportunity to qualify for the additional incentive is equitable and
not unfairly discriminatory. Unlike other market participants, NOM
Market Makers add value through continuous quoting and the commitment
of capital.\31\ Because NOM Market Makers have these obligations to the
market and regulatory requirements that normally do not apply to other
market participants, the Exchange believes that offering these rebates
to only NOM Market Makers is equitable and not unfairly discriminatory
in light of their obligations. Finally, encouraging NOM Market Makers
to add greater liquidity benefits all market participants in the
quality of order interaction.
---------------------------------------------------------------------------

    \31\ Pursuant to Chapter VII (Market Participants), Section 5
(Obligations of Market Makers), in registering as a market maker, an
Options Participant commits himself to various obligations.
Transactions of a Market Maker in its market making capacity must
constitute a course of dealings reasonably calculated to contribute
to the maintenance of a fair and orderly market, and Market Makers
should not make bids or offers or enter into transactions that are
inconsistent with such course of dealings. Further, all Market
Makers are designated as specialists on NOM for all purposes under
the Act or rules thereunder. See Chapter VII, Section 5.
---------------------------------------------------------------------------

NOM Market Maker Rebate To Add Liquidity in Penny Pilot Options
    The Exchange believes that the replacing VXX with VXXB in the Tiers
3 and 4 NOM Market Maker Rebate to Add Liquidity in Penny Pilot Options
currently applicable to AAPL, QQQ, IWM, SPY and VXX is reasonable,
equitable and not unfairly discriminatory because VXX options are no
longer listed for trading on the Exchange, and have been replaced by a
substantially similar product, VXXB options.

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. The pricing changes proposed
above are generally designed to attract additional order flow to NOM,
which strengthens NOM's competitive position. Greater liquidity
benefits all market participants by providing more trading
opportunities and attracting greater participation by market makers. An
increase in the activity of these market participants in turn
facilitates tighter spreads.
    The Exchange operates in a highly competitive market in which
market participants can readily favor competing venues if they deem fee
levels at a particular venue to be excessive, or rebate opportunities
available at other venues to be more favorable. In such an environment,
the Exchange must continually adjust its fees and rebates to remain
competitive. Because competitors are free to modify their own fees and
rebates in response, the Exchange believes that the degree to which
pricing changes in this market may impose any burden on competition is
extremely limited.

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

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\32\
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    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-2019-029 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-2019-029. 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 website (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 website 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 the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NASDAQ-2019-029, and should be submitted
on or before May 13, 2019.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
---------------------------------------------------------------------------

    \33\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-07988 Filed 4-19-19; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 76, Number 61 (Wednesday, March 30, 2011)]
[Notices]
[Page 17727]
[FR Doc No: 2011-7366]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64119; File No. SR-OCC-2011-02]

Self-Regulatory Organizations; The Options Clearing Corporation;
Order Approving Proposed Rule Change To Accommodate the Clearance of
Relative Performance Options

March 24, 2011.

I. Introduction

    On January 19, 2011, The Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change SR-OCC-2011-02 pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'').\1\ The proposed rule change
was published for comment in the Federal Register on February 7,
2011.\2\ No comment letters were received on the proposal. This order
approves the proposal.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 34-63811 (February 1,
2011), 76 FR 6648 (February 7, 2011).
---------------------------------------------------------------------------

II. Description

    The purpose of this rule change is to accommodate the clearance of
options on certain indexes measuring the relative performance of one
reference security or reference index relative to a second reference
security or reference index (``Relative Performance Options'').\3\ The
revised rules have been broadly drafted to cover Alpha Options, a
Relative Performance Option described below, and any similar product
that may be listed on any participant exchange in the future.
---------------------------------------------------------------------------

    \3\ A reference security may be an exchange-traded fund
(``ETF'').
---------------------------------------------------------------------------

    NASDAQ OMX PHLX LLC (``Phlx'') is proposing to list options
(``Alpha Options'') \4\ on NASDAQ OMX Alpha Indexes (``Alpha
Indexes''), a family of indexes developed by NASDAQ OMX Group, Inc.
(``Nasdaq''). Alpha Indexes measure relative total returns of one
underlying stock and one underlying ETF, which are also traded on the
Phlx.\5\ An Alpha Index is calculated by measuring the total return
performance of the Target Component relative to the total return
performance of the Benchmark Component based upon prices of
transactions on the primary listing exchange of each underlying
component. Each Alpha Index will initially be set at 100.00. Alpha
Options will be cash-settled, European-style options. In the event of a
corporate event that eliminates one of the underlying components of an
Alpha Index, Nasdaq will cease calculation of the Alpha Index for that
pair of underlying components, and all outstanding option positions
will be immediately settled at the last disseminated price of that
Alpha Index.
---------------------------------------------------------------------------

    \4\ Securities Exchange Act Release No. 34-63575 (December 17,
2010), 75 FR 81320 (December 27, 2010) [File No. SR-Phlx-2010-176].
    \5\ The combination of the two components is referred to as an
``Alpha Pair.'' The first component of each Alpha Pair is referred
to as the ``Target Component'' and the second component is referred
to as the ``Benchmark Component.''
---------------------------------------------------------------------------

    Relative Performance Options are highly similar to other index
options cleared by OCC except for the identity and nature of the
underlying index. Therefore, OCC believes that the provisions of its
By-Laws and Rules governing index options, as they are currently in
effect, are generally sufficient to support the clearance and
settlement of Relative Performance Options. However, minor
modifications are needed to support the clearance and settlement of
Alpha Options and other types of Relative Performance Options that may
be introduced in the future. For example, OCC's current Rules do not
account for the possibility of an index having a negative value as
could occur for certain Relative Performance Indexes. If this should
ever occur, the index value would be deemed to be equal to zero or,
because certain systems may not accept a zero index value, a near-zero
positive amount. Therefore, OCC is modifying its By-Laws to provide for
such potential adjustments of the index value by either the listing
exchange or OCC.
    In addition, OCC's current By-Laws do not account for the
possibility that an expiration date may be accelerated when a reference
security (i.e., an individual reference security and not a reference
index) that is one of the components of an underlying relative
performance index ceases to be published as a result of a cash-out
merger or similar corporate event. If the value of an underlying
Relative Performance Index ceases to be published as a result of such
an event, the value of the overlying options would become fixed.
Therefore, OCC proposes to modify its By-Laws to provide that OCC will
either accelerate or not accelerate the expiration in consultation with
the relevant exchange on which the index underlying a Relative
Performance Option is listed.

III. Discussion

    Section 17A(b)(3)(F) of the Act \6\ requires, among other things,
that the rules of a clearing agency be designed to remove impediments
to and perfect the mechanism of a national system for the prompt and
accurate clearance and settlement of securities transactions. Because
the proposed rule change modifies OCC's Rules and By-Laws to support
the clearance of Alpha Options and other types of Relative Performance
Options that may be introduced in the future, the proposed rule change
is facilitating the perfection of the national system for the clearance
and settlement of securities transactions and therefore is consistent
with the requirements of Section 17A(b)(3)(F) of the Act.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

IV. Conclusion

    On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act and in
particular with the requirements of Section 17A of the Act \7\ and the
rules and regulations thereunder.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (File No. SR-OCC-2011-02) be, and
hereby is, approved.\9\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(2).
    \9\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition and
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-7366 Filed 3-29-11; 8:45 am]
BILLING CODE 8011-01-P