[Federal Register Volume 83, Number 103 (Tuesday, May 29, 2018)]
[Notices]
[Pages 24534-24535]
[FR Doc No: 2018-11365]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33103; 812-14885]

DMS ETF Trust I, et al.

May 22, 2018.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of an application for an order under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') for an exemption from
sections 2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act and rule 22c-1
under the Act, under sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under
section 12(d)(1)(J) for an exemption from sections 12(d)(1)(A) and
12(d)(1)(B) of the Act. The requested order would permit (a) actively-
managed series of certain open-end management investment companies
(``Funds'') to issue shares redeemable in large aggregations only
(``Creation Units''); (b) secondary market transactions in Fund shares
to occur at negotiated market prices rather than at net asset value
(``NAV''); (c) certain Funds to pay redemption proceeds, under certain
circumstances, more than seven days after the tender of shares for
redemption; (d) certain affiliated persons of a Fund to deposit
securities into, and receive securities from, the Fund in connection
with the purchase and redemption of Creation Units; (e) certain
registered management investment companies and unit investment trusts
outside of the same group of investment companies as the Funds (``Funds
of Funds'') to acquire shares of the Funds; and (f) certain Funds
(``Feeder Funds'') to create and redeem Creation Units in-kind in a
master-feeder structure.

Applicants:  DMS ETF Trust I and DMS ETF Trust II (each a ``Trust'' and
together, the ``Trusts''), each a Delaware statutory trust that will be
registered under the Act as an open-end management investment company
with multiple series, and DMS ETF Solutions, LLC (``Initial Adviser''),
a Delaware limited liability company that will be registered as an
investment adviser under the Investment Advisers Act of 1940.

Filing Dates:  The application was filed on March 12, 2018.

Hearing or Notification of Hearing:  An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on June 18, 2018, and should be accompanied by proof of
service on applicants, in the form of an affidavit, or for lawyers, a
certificate of service. Pursuant to rule 0-5 under the Act, hearing
requests should state the nature of the writer's interest, any facts
bearing upon the desirability of a hearing on the matter, the reason
for the request, and the issues contested. Persons who wish to be
notified of a hearing may request notification by writing to the
Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street
NE, Washington, DC 20549-1090; Applicants: Michael W. Mundt, Esq. and
Matthew R. DiClemente, Esq., Stradley Ronon Stevens & Young, LLP, 1250
Connecticut Avenue NW, Ste. 500, Washington, DC 20036; William H.
Woolverton, DMS ETF Solutions, LLC, 130 West 42nd Street, Ste. 1050,
New York, NY 10036.

FOR FURTHER INFORMATION CONTACT: Matthew B. Archer-Beck, Senior
Counsel, at<PHONE_NUMBER>, or Kaitlin C. Bottock, Branch Chief, at
(202) 551-6825 (Division of Investment Management, Chief Counsel's
Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's website by searching for the file number, or for an
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling<PHONE_NUMBER>.

Summary of the Application

    1. Applicants request an order that would allow Funds to operate as
actively-managed exchange traded funds (``ETFs'').\1\ Fund shares will
be purchased and redeemed at their NAV in Creation Units only. All
orders to purchase Creation Units and all redemption requests will be
placed by or through an ``Authorized Participant,'' which will have
signed a participant agreement with a broker-dealer registered under
the Securities

Exchange Act of 1934 (``Exchange Act'') (the ``Distributor''). Shares
will be listed and traded individually on a national securities
exchange, where share prices will be based on the current bid/offer
market. Certain Funds may operate as Feeder Funds in a master-feeder
structure. Any order granting the requested relief would be subject to
the terms and conditions stated in the application.
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    \1\ Applicants request that the order apply to the Initial
Funds, as well as to future series of either Trust, and any other
open-end management investment companies or series thereof (each,
included in the term ``Fund''), each of which will operate as an
actively-managed ETF. Any Fund will (a) be advised by the Initial
Adviser or an entity controlling, controlled by, or under common
control with the Initial Adviser (each, an ``Adviser'') and (b)
comply with the terms and conditions of the application.
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    2. Each Fund will consist of a portfolio of securities and other
assets and investment positions (``Portfolio Instruments''). Each Fund
will disclose on its website the identities and quantities of the
Portfolio Instruments that will form the basis for the Fund's
calculation of NAV at the end of the day.
    3. Shares will be purchased and redeemed in Creation Units and
generally on an in-kind basis. Except where the purchase or redemption
will include cash under the limited circumstances specified in the
application, purchasers will be required to purchase Creation Units by
depositing specified instruments (``Deposit Instruments''), and
shareholders redeeming their shares will receive specified instruments
(``Redemption Instruments''). The Deposit Instruments and the
Redemption Instruments will each correspond pro rata to the positions
in the Fund's portfolio (including cash positions) except as specified
in the application.
    4. Because shares will not be individually redeemable, applicants
request an exemption from section 5(a)(1) and section 2(a)(32) of the
Act that would permit the Funds to register as open-end management
investment companies and issue shares that are redeemable in Creation
Units only.
    5. Applicants also request an exemption from section 22(d) of the
Act and rule 22c-1 under the Act as secondary market trading in shares
will take place at negotiated prices, not at a current offering price
described in a Fund's prospectus, and not at a price based on NAV.
Applicants state that (a) secondary market trading in shares does not
involve a Fund as a party and will not result in dilution of an
investment in shares, and (b) to the extent different prices exist
during a given trading day, or from day to day, such variances occur as
a result of third-party market forces, such as supply and demand.
Therefore, applicants assert that secondary market transactions in
shares will not lead to discrimination or preferential treatment among
purchasers. Finally, applicants represent that share market prices will
be disciplined by arbitrage opportunities, which should prevent shares
from trading at a material discount or premium from NAV.
    6. With respect to Funds that hold non-U.S. Portfolio Instruments
and that effect creations and redemptions of Creation Units in kind,
applicants request relief from the requirement imposed by section 22(e)
in order to allow such Funds to pay redemption proceeds within fifteen
calendar days following the tender of Creation Units for redemption.
Applicants assert that the requested relief would not be inconsistent
with the spirit and intent of section 22(e) to prevent unreasonable,
undisclosed or unforeseen delays in the actual payment of redemption
proceeds.
    7. Applicants request an exemption to permit Funds of Funds to
acquire Fund shares beyond the limits of section 12(d)(1)(A) of the
Act; and the Funds, and any principal underwriter for the Funds, and/or
any broker or dealer registered under the Exchange Act, to sell shares
to Funds of Funds beyond the limits of section 12(d)(1)(B) of the Act.
The application's terms and conditions are designed to, among other
things, help prevent any potential (i) undue influence over a Fund
through control or voting power, or in connection with certain
services, transactions, and underwritings, (ii) excessive layering of
fees, and (iii) overly complex fund structures, which are the concerns
underlying the limits in sections 12(d)(1)(A) and (B) of the Act.
    8. Applicants request an exemption from sections 17(a)(1) and
17(a)(2) of the Act to permit a person who is an affiliated person, as
defined in section 2(a)(3) of the Act (``Affiliated Person''), or an
affiliated person of an Affiliated Person (``Second-Tier Affiliate''),
of the Funds, solely by virtue of certain ownership interests, to
effectuate purchases and redemptions in-kind. The deposit procedures
for in-kind purchases of Creation Units and the redemption procedures
for in-kind redemptions of Creation Units will be the same for all
purchases and redemptions and Deposit Instruments and Redemption
Instruments will be valued in the same manner as those Portfolio
Instruments currently held by the Funds. Applicants also seek relief
from the prohibitions on affiliated transactions in section 17(a) to
permit a Fund to sell its shares to and redeem its shares from a Fund
of Funds, and to engage in the accompanying in-kind transactions with
the Fund of Funds.\2\ The purchase of Creation Units by a Fund of Funds
directly from a Fund will be accomplished in accordance with the
policies of the Fund of Funds and will be based on the NAVs of the
Funds.
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    \2\ The requested relief would apply to direct sales of shares
in Creation Units by a Fund to a Fund of Funds and redemptions of
those shares. Applicants, moreover, are not seeking relief from
section 17(a) for, and the requested relief will not apply to,
transactions where a Fund could be deemed an Affiliated Person, or a
Second-Tier Affiliate, of a Fund of Funds because an investment
adviser to the Funds is also an investment adviser to a Fund of
Funds.
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    9. Applicants also request relief to permit a Feeder Fund to
acquire shares of another registered investment company managed by the
Adviser having substantially the same investment objectives as the
Feeder Fund (``Master Fund'') beyond the limitations in section
12(d)(1)(A) and permit the Master Fund, and any principal underwriter
for the Master Fund, to sell shares of the Master Fund to the Feeder
Fund beyond the limitations in section 12(d)(1)(B).
    10. Section 6(c) of the Act permits the Commission to exempt any
persons or transactions from any provision of the Act if such exemption
is necessary or appropriate in the public interest and consistent with
the protection of investors and the purposes fairly intended by the
policy and provisions of the Act. Section 12(d)(1)(J) of the Act
provides that the Commission may exempt any person, security, or
transaction, or any class or classes of persons, securities, or
transactions, from any provision of section 12(d)(1) if the exemption
is consistent with the public interest and the protection of investors.
Section 17(b) of the Act authorizes the Commission to grant an order
permitting a transaction otherwise prohibited by section 17(a) if it
finds that (a) the terms of the proposed transaction are fair and
reasonable and do not involve overreaching on the part of any person
concerned; (b) the proposed transaction is consistent with the policies
of each registered investment company involved; and (c) the proposed
transaction is consistent with the general purposes of the Act.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-11365 Filed 5-25-18; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 77, Number 95 (Wednesday, May 16, 2012)]
[Notices]
[Pages 28905-28909]
[FR Doc No: 2012-11819]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66964; File No. SR-NASDAQ-2012-057]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change With Respect to the Authority
of NASDAQ or NASDAQ Execution Services To Cancel Orders When a
Technical or System Issue Occurs and To Describe the Operation of an
Error Account

May 10, 2012.
    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 30, 2012, The NASDAQ Stock Market LLC

(``NASDAQ'' or the ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') a proposed rule change as described in
Items I and II 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    NASDAQ proposes a rule change with respect to the authority of the
Exchange or NASDAQ Execution Services (``NES'') to cancel orders when a
technical or system issue occurs and to describe the operation of an
error account for NES. NASDAQ will implement the proposed change upon
approval by the Commission. The text of the proposed rule change is
available at http://nasdaq.cchwallstreet.com, at NASDAQ's principal
office, 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 self-regulatory organization
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 those 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 parts 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 to amend Rule 4758 by adding a new paragraph
(d) that addresses the authority of the Exchange or NES to cancel
orders when a technical or systems issue occurs and to describe the
operation of an error account for NES.\3\
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    \3\ NES is a facility of the Exchange. Accordingly, under Rule
4758, the Exchange is responsible for filing with the Commission
rule changes and fees relating to NES's functions. In addition, the
Exchange is using the phrase ``NES or the Exchange'' in this rule
filing to reflect the fact that a decision to take action with
respect to orders affected by a technical or systems issue may be
made in the capacity of NES or the Exchange depending on where those
orders are located at the time of that decision.
    From time to time, the Exchange also uses non-affiliate third-
party broker-dealers to provide outbound routing services (i.e.,
third-party Routing Brokers). In those cases, orders are submitted
to the third-party Routing Broker through NES, the third-party
Routing Broker routes the orders to the routing destination in its
name, and any executions are submitted for clearance and settlement
in the name of NES so that any resulting positions are delivered to
NES upon settlement. As described above, NES normally arranges for
any resulting securities positions to be delivered to the member
that submitted the corresponding order to the Exchange. If error
positions (as defined in proposed Rule 4758(d)(2)) result in
connection with the Exchange's use of a third-party Routing Broker
for outbound routing, and those positions are delivered to NES
through the clearance and settlement process, NES would be permitted
to resolve those positions in accordance with proposed Rule 4758(d).
If the third-party Routing Broker received error positions in
connection with its role as a routing broker for the Exchange, and
the error positions were not delivered to NES through the clearance
and settlement process, then the third-party Routing Broker would
resolve the error positions itself, and NES would not be permitted
to accept the error positions, as set forth in proposed Rule
4758(d)(2)(B).
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    NES is the approved routing broker of the Exchange, subject to the
conditions listed in Rule 4758. The Exchange relies on NES to provide
outbound routing services from itself to routing destinations of NES
(``routing destinations'').\4\ When NES routes orders to a routing
destination, it does so by sending a corresponding order in its own
name to the routing destination. In the normal course, routed orders
that are executed at routing destinations are submitted for clearance
and settlement in the name of NES, and NES arranges for any resulting
securities positions to be delivered to the member that submitted the
corresponding order to the Exchange. From time to time, however, the
Exchange and NES encounter situations in which it becomes necessary to
cancel orders and resolve error positions.\5\
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    \4\ The Exchange has authority to receive inbound routes of
equities orders by NES from NASDAQ OMX BX (``BX'') and the NASDAQ
OMX PSX (``PSX'') of NASDAQ OMX PHLX on a pilot basis. See
Securities Exchange Act Release No. 65554 (October 13, 2011), 76 FR
65311 (October 20, 2011) (SR-NASDAQ-2011-142).
    \5\ The examples described in this filing are not intended to be
exclusive. Proposed Rule 4758(d) would provide general authority for
the Exchange or NES to cancel orders in order to maintain fair and
orderly markets when technical and systems issues are occurring, and
Rule 4758(d) also would set forth the manner in which error
positions may be handled by the Exchange or NES. The proposed rule
change is not limited to addressing order cancellation or error
positions resulting only from the specific examples described in
this filing.
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Examples of Circumstances That May Lead to Canceled Orders
    A technical or systems issue may arise at NES, a routing
destination, or the Exchange that may cause the Exchange or NES to take
steps to cancel orders if the Exchange or NES determines that such
action is necessary to maintain a fair and orderly market. The examples
set forth below describe some of the circumstances in which the
Exchange or NES may decide to cancel orders.

    Example 1. If NES or a routing destination experiences a
technical or systems issue that results in NES not receiving
responses to immediate or cancel (``IOC'') orders that it sent to
the routing destination, and that issue is not resolved in a timely
manner, NES or the Exchange would seek to cancel the routed orders
affected by the issue.\6\ For instance, if NES experiences a
connectivity issue affecting the manner in which it sends or
receives order messages to or from routing destinations, it may be
unable to receive timely execution or cancellation reports from the
routing destinations, and NES or the Exchange may consequently seek
to cancel the affected routed orders. Once the decision is made to
cancel those routed orders, any cancellation that a member submitted
to the Exchange on its initial order during such a situation would
be honored.\7\
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    \6\ In a normal situation (i.e., one in which a technical or
systems issue does not exist), NES should receive an immediate
response to an IOC order from a routing destination, and would pass
the resulting fill or cancellation on to the Exchange member. After
submitting an order that is routed to a routing destination, if a
member sends an instruction to cancel that order, the cancellation
is held by the Exchange until a response is received from the
routing destination. For instance, if the routing destination
executes that order, the execution would be passed on to the member
and the cancellation instruction would be disregarded.
    \7\ If a member did not submit a cancellation to the Exchange,
however, that initial order would remain ``live'' and thus be
eligible for execution or posting on the Exchange, and neither the
Exchange nor NES would treat any execution of that initial order or
any subsequent routed order related to that initial order as an
error.
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    Example 2. If the Exchange experiences a systems issue, the
Exchange may take steps to cancel all outstanding orders affected by
that issue and notify affected members of the cancellations. In
those cases, the Exchange would seek to cancel any routed orders
related to the members' initial orders.
Examples of Circumstances That May Lead to Error Positions
    In some instances, the technical or systems issue at NES, a routing
destination, the Exchange, or a non-affiliate third party Routing
Broker may also result in NES acquiring an error position that it must
resolve. The examples set forth below describe some of the
circumstances in which error positions may arise.

    Example A. Error positions may result from routed orders that
the Exchange or NES attempts to cancel but that are executed before
the routing destination receives the cancellation message or that
are executed because the routing destination is unable to process
the cancellation message. Using the situation described in Example 1
above, assume that the Exchange seeks to cancel orders routed to a
routing destination because it is not receiving timely execution or
cancellation reports from the routing destination. In such a
situation, NES may

still receive executions from the routing destination after
connectivity is restored, which it would not then allocate to
members because of the earlier decision to cancel the affected
routed orders. Instead, NES would post those positions into its
error account and resolve the positions in the manner described
below.
    Example B. Error positions may result from an order processing
issue at a routing destination. For instance, if a routing
destination experienced a systems problem that affects its order
processing, it may transmit back a message purporting to cancel a
routed order, but then subsequently submit an execution of that same
order (i.e., a locked-in trade) to The Depository Trust & Clearing
Corporation (``DTCC'') for clearance and settlement. In such a
situation, the Exchange would not then allocate the execution to the
member because of the earlier cancellation message from the routing
destination. Instead, NES would post those positions into its error
account and resolve the positions in the manner described below.
    Example C. Error positions may result if NES receives an
execution report from a routing destination but does not receive
clearing instructions for the execution from the routing
destination. For instance, assume that a member sends the Exchange
an order to buy 100 shares of ABC stock, which causes NES to send an
order to a routing destination that is subsequently executed,
cleared, and closed out by that routing destination, and the
execution is ultimately communicated back to that member. On the
next trading day (T+1), if the routing destination does not provide
clearing instructions for that execution, NES would still be
responsible for settling that member's purchase, but would be left
with a short position in its error account.\8\ NES would resolve the
position in the manner described below.
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    \8\ To the extent that NES incurred a loss in covering its short
position, it would submit a reimbursement claim to that routing
destination.
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    Example D. Error positions may result from a technical or
systems issue that causes orders to be executed in the name of NES
that are not related to NES's function as the Exchange's routing
broker and are not related to any corresponding orders of members.
As a result, NES would not be able to assign any positions resulting
from such an issue to members. Instead, NES would post those
positions into its error account and resolve the positions in the
manner described below.
    Example E. Error positions may result from a technical or
systems issue through which the Exchange does not receive sufficient
notice that a member that has executed trades on the Exchange has
lost the ability to clear trades through DTCC. In such a situation,
the Exchange would not have valid clearing information, which would
prevent the trade from being automatically processed for clearance
and settlement on a locked-in basis. Accordingly, NES would assume
that member's side of the trades so that the counterparties can
settle the trades. NES would post those positions into its error
account and resolve the positions in the manner described below.
    Example F. Error positions may result from a technical or
systems issue at the Exchange that does not involve routing of
orders through NES. For example, a situation may arise in which a
posted quote/order was validly cancelled but the system erroneously
matched that quote/order with an order that was seeking to access
it. In such a situation, NES would have to assume the side of the
trade opposite the order seeking to access the cancelled quote/
order. NES would post the position in its error account and resolve
the position in the manner described below.

    In the circumstances described above, neither the Exchange nor NES
may learn about an error position until T+1, either: (1) During the
clearing process when a routing destination has submitted to DTCC a
transaction for clearance and settlement for which NES never received
an execution confirmation; or (2) when a routing destination does not
recognize a transaction submitted by NES to DTCC for clearance and
settlement. Moreover, the affected members' trade may not be nullified
absent express authority under Exchange rules.\9\
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    \9\ See, e.g., Rule 11890 (regarding clearly erroneous
executions).
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Proposed Amendments to Rule 4758
    The Exchange proposes to amend Rule 4758 to add new paragraph (d)
to address the cancellation of orders due to technical or systems
issues and the use of an error account by NES.
    Specifically, under paragraph (d)(1) of the proposed rule, the
Exchange or NES would be expressly authorized to cancel orders as may
be necessary to maintain fair and orderly markets if a technical or
systems issue occurred at the Exchange, NES, or a routing
destination.\10\ The Exchange or NES would be required to provide
notice of the cancellation to affected members as soon as practicable.
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    \10\ Such a situation may not cause the Exchange to declare
self-help against the routing destination pursuant to Rule 611 of
Regulation NMS. If the Exchange or NES determines to cancel orders
routed to a routing destination under proposed Rule 4758(d), but
does not declare self-help against that routing destination, the
Exchange would continue to be subject to the trade-through
requirements in Rule 611 with respect to that routing destination.
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    Paragraph (d)(2) of the proposed rule would permit NES to maintain
an error account for the purpose of addressing positions that result
from a technical or systems issue at NES, the Exchange, a routing
destination, or a non-affiliate third-party Routing Broker that affects
one or more orders (``error positions''). By definition, an error
position would not include any position that results from an order
submitted by a member to the Exchange that is executed on the Exchange
and automatically processed for clearance and settlement on a locked-in
basis. NES also would not be permitted to accept any positions in its
error account from an account of a member and could not permit any
member to transfer any positions from the member's account to NES's
error account under the proposed rule.\11\ However, if a technical or
systems issue results in the Exchange not having valid clearing
instructions for a member to a trade, NES may assume that member's side
of the trade so that the trade can be processed for clearance and
settlement on a locked-in basis.\12\
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    \11\ The purpose of this provision is to clarify that NES may
address error positions under the proposed rule that are caused by a
technical or systems issue, but that NES may not accept from a
member positions that are delivered to the member through the
clearance and settlement process, even if those positions may have
been related to a technical or systems issue at NES, the Exchange, a
routing destination of NES, or a non-affiliate third-party Routing
Broker. This provision would not apply, however, to situations like
the one described in Example C in which NES incurred a short
position to settle a member's purchase, as the member did not yet
have a position in its account as a result of the purchase at the
time of NES's action (i.e., NES's action was necessary for the
purchase to settle into the member's account). Similarly, the
provision would not apply to situations like the one described in
Example F, where a system issue caused one member to receive an
execution for which there was not an available contraparty, in which
case action by NES would be necessary for the position to settle
into that member's account. Moreover, to the extent a member
receives locked-in positions in connection with a technical or
systems issue, that member may seek to rely on NASDAQ Rule 4626 if
it experiences a loss. That rule provides members with the ability
to file claims against the Exchange for ``losses directly resulting
from the [NASDAQ] systems' actual failure to correctly process an
order, Quote/Order, message, or other data, provided the Nasdaq
Market Center has acknowledged receipt of the order, Quote/Order,
message, or data.''
    \12\ See Example E above.
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    Under paragraph (d)(3), in connection with a particular technical
or systems issue, NES or the Exchange would be permitted to either (i)
assign all resulting error positions to members, or (ii) have all
resulting error positions liquidated, as described below. Any
determination to assign or liquidate error positions, as well as any
resulting assignments, would be required to be made in a
nondiscriminatory fashion.
    NES or the Exchange would be required to assign all error positions
resulting from a particular technical or systems issue to the
applicable members affected by that technical or systems issue if NES
or the Exchange:
     Determined that it has accurate and sufficient information
(including valid clearing information) to assign the positions to all
of the applicable members affected by that technical or systems issue;
     Determined that it has sufficient time pursuant to normal
clearance and settlement deadlines to evaluate the information
necessary to assign the

positions to all of the applicable members affected by that technical
or systems issue; and
     Had not determined to cancel all orders affected by that
technical or systems issue.
    For example, a technical or systems issue of limited scope or
duration may occur at a routing destination, and the resulting trades
may be submitted for clearance and settlement by such routing
destination to DTCC. If there were a small number of trades, there may
be sufficient time to match positions with member orders and avoid
using the error account.
    There may be scenarios, however, where NES determines that it is
unable to assign all error positions resulting from a particular
technical or systems issue to all of the affected members, or
determines to cancel all affected routed orders. For example, in some
cases, the volume of questionable executions and positions resulting
from a technical or systems issue might be such that the research
necessary to determine which members to assign those executions to
could be expected to extend past the normal settlement cycle for such
executions. Furthermore, if a routing destination experiences a
technical or systems issue after NES has transmitted IOC orders to it
that prevents NES from receiving responses to those orders, NES or the
Exchange may determine to cancel all routed orders affected by that
issue. In such a situation, NES or the Exchange would not pass on to
the members any executions on the routed orders received from the
routing destination.
    The proposed rule also would require NES to liquidate error
positions as soon as practicable.\13\ In liquidating error positions,
NES would be required to provide complete time and price discretion for
the trading to liquidate the error positions to a third-party broker-
dealer and could not attempt to exercise any influence or control over
the timing or methods of trading to liquidate the error positions.\14\
NES also would be required to establish and enforce policies and
procedures reasonably designed to restrict the flow of confidential and
proprietary information between the third-party broker-dealer and NES/
the Exchange associated with the liquidation of the error positions.
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    \13\ If NES determines in connection with a particular technical
or systems issue that some error positions can be assigned to some
affected members but other error positions cannot be assigned, NES
would be required under the proposed rule to liquidate all such
error positions (including those positions that could be assigned to
the affected members).
    \14\ This provision is not intended to preclude NES from
providing the third-party broker with standing instructions with
respect to the manner in which it should handle all error account
transactions. For example, NES might instruct the broker to treat
all orders as ``not held'' and to attempt to minimize any market
impact on the price of the stock being traded.
---------------------------------------------------------------------------

    Under proposed paragraph (d)(4), NES and the Exchange would be
required to make and keep records to document all determinations to
treat positions as error positions and all determinations for the
assignment of error positions to members or the liquidation of error
positions, as well as records associated with the liquidation of error
positions through the third-party broker-dealer.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \15\ of
the Securities Exchange Act of 1934 (the ``Act''), in general, and
furthers the objectives of Section 6(b)(5),\16\ in particular, in that
it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system and,
in general, to protect investors and the public interest, and it is not
designed to permit unfair discrimination among customers, brokers, or
dealers. The Exchange believes that this proposal is in keeping with
those principles since NES's or the Exchange's ability to cancel orders
during a technical and systems issue and to maintain an error account
facilitates the smooth and efficient operations of the market.
Specifically, the Exchange believes that allowing NES or the Exchange
to cancel orders during a technical or systems issue would allow the
Exchange to maintain fair and orderly markets. Moreover, the Exchange
believes that allowing NES to assume error positions in an error
account and to liquidate those positions, subject to the conditions set
forth in the proposed amendments to Rule 4758, would be the least
disruptive means to correct these errors, except in cases where NES can
assign all such error positions to all affected members of the
Exchange. Overall, the proposed amendments are designed to ensure full
trade certainty for market participants and to avoid disrupting the
clearance and settlement process. The proposed amendments are also
designed to provide a consistent methodology for handling error
positions in a manner that does not discriminate among members. The
proposed amendments are also consistent with Section 6 of the Act
insofar as they would require NES to establish controls to restrict the
flow of any confidential information between the third-party broker and
NES/the Exchange associated with the liquidation of error positions.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

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

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

    Written comments were neither solicited nor received.

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be 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_ADDRESS>Please include
File Number SR-NASDAQ-2012-057 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2012-057. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of 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; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2012-057, and should
be submitted on or before June 6, 2012.
---------------------------------------------------------------------------

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

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-11819 Filed 5-15-12; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: April 1, 2008 (Volume 73, Number 63)]
[Notices]
[Page 17388-17390]
[DOCID:fr01ap08-87]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57555; File No. SR-NYSE-2008-18]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Extend the Compliance Deadline for NYSE Members To Complete Required
2007 Continuing Education Modules Under NYSE Rule 103A

March 26, 2008.
    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 March 13, 2008, the New York Stock Exchange LLC (``NYSE'' or the
``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 substantially
by the Exchange. The Exchange has designated this proposal as
constituting a stated policy, practice, or interpretation with respect
to the meaning, administration, or enforcement of an existing rule of
the self-regulatory organization pursuant to section 19(b)(3)(A)(i) of
the Act \3\ and Rule 19b-4(f)(1) thereunder,\4\ which renders the
proposal effective upon filing with the Commission. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------

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

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

    The Exchange proposes to extend the compliance deadline for NYSE
members to complete required 2007 continuing education modules pursuant
to NYSE Rule 103A. There is no proposed rule text.

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
    NYSE Rule 103A requires that the Exchange provide continuing
education programs for Floor members. All NYSE members who work on the
Floor of the Exchange must complete the education programs; failure to
do so within the prescribed time frame results in the member being
barred from entering the Exchange Floor.
    Over the past year, NYSE Regulation, Inc., which supervises the
creation and delivery of content for the Floor Member Continuing
Education (``FMCE'') program, has been developing a Learning Management
System (``LMS'') that automates the delivery of program content to
members via a Web-based interactive program that participants can
access from an Internet-capable computer. Because the new LMS changed
certain details about how the program was delivered, the Exchange filed
certain amendments to Rule 103A to update the Rule in light of the new
system requirements.\5\ The Exchange expects to launch the LMS during
March 2008. In order to meet its requirements for 2007, NYSE Regulation
delivered certain FMCE modules via in-person classes held in November
and December 2007. Approximately 300 members failed to participate in
each of the three modules. Under the previous version of Rule 103A,
which applied to the 2007 FMCE program, a member had 120 days from
original assignment date to make up missed classes. (The deadline for
making up a missed element has since been shortened pursuant to amended
NYSE Rule 103A.) Under the former version of the Rule, the deadline by
which the first module must be completed via a make-up session is March
18, 2008; the latest will be April 18, 2008.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 56851 (November 28,
2007), 72 FR 68932 (December 6, 2007) (SR-NYSE-2007-106).
---------------------------------------------------------------------------

    NYSE Regulation intended to employ the LMS to allow members to
make-up missed classes within the allotted 120 days. (All live sessions
were videotaped and these archived sessions will be available through
the LMS.) However, technical difficulties have delayed the LMS's
launch. We now anticipate launching the LMS during the week of March
10, 2008.\6\
    Given the delays in rolling out the LMS, NYSE Regulation proposes
to grant all members with open 2007 FMCE assignments an extension to
their deadline under the Rule. The extension will be relatively short
in time and will apply only to 2007 FMCE modules. At this time, we will
be giving each member 30 days to complete a 2007 module from the time a
make-up assignment is made available through the LMS. This filing seeks
authorization from the Commission to grant the necessary extensions.
---------------------------------------------------------------------------

    \6\ See NYSE Regulation, Inc. Information Memo 08-9 (March 14,
2008) (announcing implementation of the LMS).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
and furthers the objectives of section 6(b)(5) of the Act,\7\ in that
it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of, a free and open market
and a national market system, and, in general, to protect investors and
the public interest.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

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

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

    No written comments were solicited or received with respect to the
proposed rule change.

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

    The proposed rule change has become effective pursuant to section
19(b)(3)(A)(i) of the Act \8\ and Rule 19b-4(f)(1) thereunder,\9\ in
that the proposed rule change constitutes a stated policy, practice, or
interpretation with respect to the meaning, administration, or
enforcement of an existing rule of the self-regulatory organization.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A)(i).
    \9\ 17 CFR 240.19b-4(f)(1).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-NYSE-2008-18 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2008-18. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all
written statements

with respect to the proposed rule change that are filed with the
Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Room, 100 F Street, NE., Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. Copies of such filing also will be available for inspection and
copying at the principal office of the Exchange. All comments received
will be posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make publicly available. All submissions
should refer to File Number SR-NYSE-2008-18 and should be submitted on
or before April 22, 2008.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
Florence E. Harmon,
Deputy Secretary.
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    \10\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E8-6608 Filed 3-31-08; 8:45 am]

BILLING CODE 8011-01-P