Notice: Securities Exchange Act: National Stock Exchange

Thursday,
July 6, 2006
Part II
Securities and
Exchange
Commission
Self-Regulatory Organizations; National
Stock Exchange; Notice
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38452 Federal Register / Vol. 71, No. 129 / Thursday, July 6, 2006 / Notices
SECURITIES AND EXCHANGE RULES OF NATIONAL STOCK N. [Reserved.]

COMMISSION EXCHANGE, INC.
NSX Book
[Release No. 34–54044; File No. SR–NSX– * * * * *
(1) The term ‘‘NSX Book’’ shall mean
2006–08]
CHAPTER I. Adoption, Interpretation the System’s electronic file of orders.
Self-Regulatory Organizations; and Application of Rules, and O. No change.
National Stock Exchange; Notice of Definitions P.
Filing of Proposed Rule Change and * * * * * (1) No change.
Amendment No. 1 Thereto To Amend Protected NBBO
Its Trading Rules To Provide for a Rule 1.4. [Reserved.] Effective Time
Strict Price-Time Priority Market and (a) All Exchange Rules shall be (2) The term ‘‘Protected NBBO’’ shall
Other Related Changes effective when approved by the mean the national best bid or offer that
Commission in accordance with the Act is a protected quotation.
June 26, 2006.
and the rules and regulations Protected Quotation
Pursuant to Section 19(b)(1) of the thereunder, except for those Rules that
Securities Exchange Act of 1934 (3) The term ‘‘protected quotation’’
are effective upon filing with the
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 means a bid or offer in a stock that (i)
Commission in accordance with the Act
notice is hereby given that on June 6, is displayed by an automated trading
and the rules thereunder and except as
2006, the National Stock center; (ii) is disseminated pursuant to
otherwise specifically provided in this
Exchange SM(‘‘NSX’’ or ‘‘Exchange’’) a national market system plan approved
Rule 1.4 or elsewhere in these Rules.
filed with the Securities and Exchange (b) Rule 11.11(c)(7)(iv) (relating to by the Commission; and (iii) is an
Commission (‘‘Commission’’) the Sweep Orders) shall not become automated quotation that is the best bid
proposed rule change as described in effective until the compliance date for or best offer of a national securities
Items I, II, and III below, which Items Rule 611 of Regulation NMS under the exchange or association.
have been prepared by the NSX. On Act (‘‘Regulation NMS’’). Q. [Reserved.]
June 22, 2006, the Exchange submitted (c) Prior to the compliance date for Qualified Clearing Agency
Amendment No. 1 to the proposed rule the appropriate sections of Regulation
change.3 The Commission is publishing (1) The term ‘‘Qualified Clearing
NMS, the following Rules shall only
this notice to solicit comments on the Agency’’ means a clearing agency
apply to quotations for securities subject
proposed rule change, as amended, from registered with the Commission
to the Intermarket Trading System Plan:
interested persons. (i) The second sentence of the lead-in pursuant to Section 17A of the Act that
to Rule 11.15 (Order Execution); and is deemed qualified by the Exchange.
I. Self-Regulatory Organization’s R. [Reserved.]
Statement of the Terms of Substance of (ii) Rule 11.22 (Locking or Crossing
the Proposed Rule Change Quotations in NMS Stocks). Regular Trading Hours
The Exchange is proposing to amend Rule 1.5. Definitions (1) The term ‘‘Regular Trading Hours’’
Chapter 11 of the Exchange Rules A. means the time between 8:30 a.m. and
(relating to Trading Rules) in order to (1) No change. 3:00 p.m. Central Time.
incorporate a strict price-time priority S.
automatic execution trading model to Authorized Trader
Sponsored Participant
replace the Exchange’s current market (2) The term ‘‘Authorized Trader’’ or
structure. In connection with the ‘‘AT’’ shall mean a person who may (1) The term ‘‘Sponsored Participant’’
changes to its Trading Rules, the submit orders (or who supervises a shall mean a person which has entered
Exchange is also proposing to include routing engine that may automatically into a sponsorship arrangement with a
certain new definitions and general submit orders) to the Exchange’s trading Sponsoring ETP Holder pursuant to
provisions in the Exchange Rules, to facilities on behalf of his or her ETP Rule 11.9.
move rules relating to exchange Holder or Sponsored Participant. Sponsoring ETP Holder
products to another new chapter of the B.–K. No change.
Exchange Rules, and to make certain L. [Reserved.] (2) The term ‘‘Sponsoring ETP
other technical changes in connection Holder’’ shall mean a broker-dealer that
with the new trading system. The text Listing Exchange has been issued an ETP by the Exchange
of the proposed rule change is set forth (1) The term ‘‘Listing Exchange’’ shall who has been designated by a
below. Proposed new language is in mean the national securities exchange Sponsored Participant to execute, clear
italics; proposed deletions are in or association on which a security is and settle transactions resulting from
[brackets]. listed. the System. The Sponsoring ETP Holder
* * * * * M. [Reserved.] shall be either (i) a clearing firm with
membership in a clearing agency
1 15
Market Maker registered with the Commission that
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4. (1) The term ‘‘Market Maker’’ shall maintains facilities through which
3 Amendment No. 1 inserted a new NSX Rule mean an ETP Holder that acts as a transactions may be cleared or (ii) a
2.11 relating to NSX Securities, LLC in the Market Maker pursuant to Chapter XI. correspondent firm with a clearing
Exchange’s rules. Amendment No. 1 also revised arrangement with any such clearing
NSX Rules 11.3(b) and 11.12 relating to crosses, Market Maker Authorized Trader
Midpoint Crosses, and Clean Crosses, to reflect the firm.
(2) The term ‘‘Market Maker
delayed compliance date for Rule 611 of Regulation

NMS under the Act and to add a requirement that Authorized Trader’’ or ‘‘MMAT’’ shall Statutory Disqualification
Clean Crosses have an aggregate value of at least mean an authorized trader who (3) The term ‘‘statutory
$100,000. In addition, Amendment No. 1 made
corresponding changes to Item 3 of the proposed
performs market making activities disqualification’’ shall mean any
rule change to reflect these additional rule changes pursuant to Chapter XI on behalf of a statutory disqualification as defined in
and also made additional minor clarifying edits. Market Maker. the Act.
Federal Register / Vol. 71, No. 129 / Thursday, July 6, 2006 / Notices 38453
System Exchange and is providing outbound Maker on the Exchange, or has a

(4) The term ‘‘System’’ shall mean the routing of orders from the Exchange to specialist operation on another market
electronic securities communications other securities exchanges, facilities of (an ETP Holder engaged in any of the
and trading facility designated by the securities exchanges, automated trading foregoing is referred to in this Rule 5.5
Board through which orders of Users are systems, electronic communications as a ‘‘specialist’’) must establish a
consolidated for ranking and execution. networks or other brokers or dealers functional separation (‘‘Chinese Wall’’)
T. [Reserved.] (collectively, ‘‘Trading Centers’’) (such between the specialist operation and
function of NSX Securities is referred to any associated or affiliated persons as
Top of Book as the ‘‘Outbound Router’’), each of the appropriate to its operation. [and
(1) The term ‘‘Top of Book’’ shall Exchange and NSX Securities shall further] Further, all ETP Holders must
mean the best-ranked order to buy (or undertake as follows: establish, maintain and enforce written
sell) in the NSX Book as ranked 1. The Exchange will regulate the procedures reasonably designed to
pursuant to Rule 11.14. Outbound Router function of NSX prevent the misuse of material, non-
U. [Reserved.] Securities as a facility (as defined in public information, which includes
Section 3(a)(2) of the Act), subject to review of employee and proprietary
User
Section 6 of the Act. In particular, and trading, memorialization and
(1) The term ‘‘User’’ shall mean any without limitation, under the Act, the documentation of procedures,
ETP Holder or Sponsored Participant Exchange will be responsible for filing substantive supervision of
who is authorized to obtain access to the with the Commission rule changes and interdepartmental communications by
System pursuant to Rule 11.9. fees relating to the NSX Securities the [Exchange specialist] firm’s
UTP Security Outbound Router function and NSX Compliance Department and procedures
Securities will be subject to exchange concerning proprietary trading when the
(2) The term ‘‘UTP Security’’ shall non-discrimination requirements. firm is in possession of material, non-
mean any security that is not listed on 2. The National Association of public information. The [Exchange
the Exchange but is traded on the Securities Dealers (‘‘NASD’’), a self- specialist] firm must obtain the prior
Exchange pursuant to unlisted trading regulatory organization unaffiliated written approval of the Exchange that it
privileges. with the Exchange or any of its has complied with the requirements
V.–Z. No change. affiliates, will carry out oversight and above in establishing functional
* * * * * enforcement responsibilities as the separation as appropriate to the
CHAPTER II. ETP Holders of the designated examining authority operation and that it has established
Exchange designated by the Commission pursuant proper compliance and audit
to Rule 17d–1 of the Act with the procedures to ensure the maintenance of
* * * * * responsibility for examining NSX the functional separation. A copy of
Rule 2.4. Restrictions Securities for compliance with the these Chinese Wall procedures, and any
applicable financial responsibility rules. amendments thereto, must be filed with
(a)–(e) No change. 3. An ETP Holder’s use of NSX the Exchange’s Surveillance
Interpretations and Policies Securities to route orders to another Department.
Trading Center will be optional. Any (b)–(e) No change.
.01–.02 No change.
[.03 An Exchange member may only ETP Holder that does not want to use * * * * *
give-up its own or another Exchange NSX Securities may use other routers to
route orders to other Trading Centers. CHAPTER XI. Trading Rules
member’s clearing number when
4. NSX Securities will not engage in Rule 11.1. Hours of Trading
executing a transaction on the
any business other than (a) its
Exchange; provided, however, that a (a) [Except as provided below, the
Outbound Router function and (b) any
member may give-up a non-member’s hours of trading on the Exchange shall
other activities it may engage in as
clearing number when executing a be from 8:30 a.m. to 3:05 p.m. local
approved by the Commission.
transaction on the Exchange if (i) the Chicago time during normal business
non-member (a) is a registered broker- * * * * *
days.
dealer and is a self-clearing member of CHAPTER III. Rules of Fair Practice (b) Unless otherwise provided by the
the National Securities Clearing Board, the hours of trading for any
* * * * *
Corporation (‘‘NSCC’’) and (b) consents security traded on the Exchange which
to the disciplinary jurisdiction of the Rule 3.6. Fair Dealing with Customers is also traded on another national
Exchange and agrees to adhere to all (a)–(f) No change. securities exchange or on the Nasdaq
applicable Exchange By-Laws and Stock Market (hereinafter ‘‘Nasdaq’’)
Rules; and (ii) the executing member’s Interpretations and Policies (‘‘dually traded’’) or exchanges and
guaranteeing clearing firm, who must be .01 [Designated Dealers] ETP Nasdaq (‘‘multiply traded’’) shall be, in
an Exchange member, agrees to accept Holders who handle customer orders on addition to the hours of trading set forth
financial responsibility for all the Exchange shall establish and enforce in paragraph (a) of this Rule, the hours
transactions given-up to the non- fixed standards for queuing and during which the security is traded on
member, including but not limited to, executing customer orders. the principal exchange or Nasdaq.
responsibility to clear and settle the * * * * * (c) For purposes of this Chapter, the
non-member’s trades in the event that term ‘‘principal exchange,’’ when used
the non-member or the NSCC does not CHAPTER V. Supervision with respect to a dually or multiply-
accept any such trades]. * * * * * traded security, shall mean the
* * * * * exchange or Nasdaq with the greatest

Rule 5.5. Chinese Wall Procedures trading volume in that security for the
Rule 2.11 NSX Securities, LLC (a) An [Exchange Designated Dealer] preceding calendar month.] The
For so long as NSX Securities, LLC ETP Holder that trades for its own Exchange shall open for the transaction
(‘‘NSX Securities’’) is affiliated with the account in a security, acts as a Market of business during such hours as is
determined by the Board, with notice to apply for the third preceding business security sells ex-dividend or ex-
ETP Holders. day. Transactions in stocks made for distribution. The new price of the order
(b) The Exchange will be open for the ‘‘cash’’ shall be ex-dividend or ex-rights is determined by dividing the price of
transaction of business on business on the business day following said the original order by 100% plus the
days. The Exchange will not be open for record date or date of closing of transfer percentage value of the stock dividend
business on the following holidays: New books. In respect to stock dividends or stock distribution. If, as a result of
Year’s Day, Dr. Martin Luther King Jr. and/or splits which are 25% or greater, this calculation, the price is not
Day, Presidents Day, Good Friday, the ex-dividend date shall be the first equivalent to or is not a multiple of the
Memorial Day, Independence Day, business date following the payable variation of a dollar in which bids and
Labor Day, Thanksgiving Day or date, except in the case of a dually or offers are made in the particular
Christmas. When any holiday observed multiply-traded security where the security, the price should be rounded to
by the Exchange falls on a Saturday, the principal exchange or Nasdaq on which the next lower variation; (iii) In the case
Exchange will not be open for business such a security is traded shall have a of reverse splits, all orders (including
on the preceding Friday. When any different rule or when the Board of the open sell orders and open stop orders to
holiday observed by the Exchange falls Exchange shall provide otherwise.] buy) should be cancelled.
on a Sunday, the Exchange will not be The Exchange shall designate (c) In the case of a stock dividend or
open for business on the following securities for trading. Any class of stock distribution, the procedure to be
Monday, unless otherwise indicated by securities listed or admitted to unlisted followed in increasing open buy orders
the Exchange. trading privileges on the Exchange and open stop orders to sell shall be as
pursuant to Chapter XV of these Rules follows: (i) When there is a stock
Rule 11.2. [Unit] Units of Trading shall be eligible to become designated dividend or stock distribution which
[The unit of trading of stocks on the for trading on the Exchange. All results in one of more full shares for
Exchange shall be 100 shares, and the securities designated for trading are each share held, the number of shares in
unit of trading of bonds on the Exchange eligible for odd-lot, round-lot and open buy orders and open stop orders
shall be $1,000 original principal mixed-lot executions, unless otherwise to sell shall be increased accordingly;
amount, except in the case of a dually indicated by the Exchange or limited (ii) When there is a stock dividend or
or multiply-traded security where the pursuant to these Rules. stock distribution on less than a one-for-
principal exchange or Nasdaq shall have one basis which thus results in
Rule 11.5. [Orders to be Reduced and
a different unit of trading or when the fractional shares, open buy orders and
Increased on Ex-Date] Registration of
Board of the Exchange shall provide open stop orders to sell shall be
Market Makers
otherwise.] increased to the lowest full round lot;
One hundred (100) shares shall [(a) Except in the case of a dually or (iii) When there is a stock dividend or
constitute a ‘‘round lot,’’ any amount multiply-traded security where the stock distribution which results in
less than 100 shares shall constitute an principal exchange or Nasdaq on which fractional shares combined with full
‘‘odd lot,’’ and any amount greater than a security is traded shall have a different shares, the number of shares in open
100 shares that is not a multiple of a rule or the Board of the Exchange shall buy orders and open stop orders to sell
round lot shall constitute a ‘‘mixed lot.’’ provide otherwise, when a security is shall be increased to the lowest full
quoted ‘‘ex-dividend,’’ ‘‘ex- round lot.
Rule 11.3. Price Variations distribution,’’ ‘‘ex-rights’’ or ‘‘ex- (d) Open orders held by a member
(a) No change. interest,’’ the following kinds of orders prior to the day a stock sells ex-
(b) Except as provided in Rule shall be reduced in price and increased dividend, ex-distribution or ex-rights
11.12(c) or (d), Crosses executed in in shares, in the case of stock dividends shall be reduced in price and, if the
accordance with Rule 11.12 must and stock distributions which result in above is applicable, increased in shares
improve each side of the Top of Book by round lots, on the day the security sells by the value of the dividend or
at least $0.01 per share. No Crosses may ex: (i) Open buy orders; (ii) Open stock distribution of rights, unless the
be executed in increments smaller than orders to sell (with open stop limit member is otherwise instructed by the
those permitted by Rule 11.3(a), except orders to sell, the limit, as well as the customer from whom the orders were
for Midpoint Crosses (as defined in Rule stop price, shall be reduced). The received. In this regard, a customer may
11.2(c)), which may be executed in following orders shall not be reduced: enter a Do Not Reduce or ‘‘DNR’’ order
increments as little as one-half the (i) Open stop orders to buy; (ii) Open if he does not want the price of an order
minimum increment permitted by Rule sell orders. reduced for cash dividends, or a Do Not
11.3(a). (b) The procedure to be followed in Increase or ‘‘DNI’’ order if he does not
reducing the above kinds of orders shall want an order increased in shares for
Rule 11.4. [Trading Ex-Dividend, Etc.] be as follows: (i) In the case of a cash stock dividends or stock distributions.]
Securities Eligible for Trading dividend disbursement, the price shall (a) No ETP Holder shall act as a
[Transactions in stocks (except those be reduced by the amount of such Market Maker in any security unless
made for ‘‘cash’’) shall be ex-dividend disbursement in an amount equal to, or such ETP Holder is registered as a
or ex-rights on the second business day a multiple of, the variation in which Market Maker in such security by the
preceding the record date fixed by the bids and offers are made. Should the Exchange pursuant to this Rule and the
corporation or the date of the closing of disbursement be in an amount other Exchange has not suspended or
the transfer books, except in the case of than the variation in which bids and cancelled such registration. Registered
a dually or multiply-traded security offers are made, or a multiple thereof, Market Makers are designated as dealers
where the principal exchange or Nasdaq orders shall be reduced by the next on the Exchange for all purposes under
on which a security is traded shall have higher variation; (ii) In the case of stock the Act and the rules and regulations
a different rule or when the Board of the dividends or other stock distribution, thereunder.
Exchange shall provide otherwise. open buy orders and open stop orders (b) An applicant for registration as a
Should such record date or such closing to sell shall be reduced in price by the Market Maker shall file an application
of transfer books occur upon a day other proportional value of a stock dividend in writing on such form as the Exchange
than a business day, this Rule shall or stock distribution on the day a may prescribe. Applications shall be
reviewed by the Exchange, which shall complete the General Securities located in Chicago, Illinois, or
consider such factors including, but not Representative Examination (Series 7) elsewhere as designated by the
limited to capital operations, personnel, and any other training and/or Exchange’s Board.]
technical resources, and disciplinary certification programs as may be (a) A Market Maker may become
history. Each Market Maker must have required by the Exchange; provided, registered in a newly authorized security
and maintain minimum net capital of at however, the requirement to complete or in a security already admitted to
least the amount required under Rule the Series 7 Examination may be waived dealings on the Exchange by filing a
15c3–1 of the Act. by the Exchange if the applicant MMAT security registration form with the
(c) An applicant’s registration as a has served as a dealer-specialist or Exchange. Registration in the security
Market Maker shall become effective market maker on a registered national shall become effective on the first
upon receipt by the ETP Holder of securities exchange or association for at business day following the Exchange’s
notice of an approval of registration by least two consecutive years within three approval of the registration, unless
the Exchange. years of the date of application. otherwise provided by the Exchange. In
(d) The registration of a Market Maker (3) The Exchange may require a considering the approval of the
may be suspended or terminated by the Market Maker to provide any and all registration of the Market Maker in a
Exchange if the Exchange determines additional information the Exchange security, the Exchange may consider:
that: deems necessary to establish whether (1) The financial resources available
(1) The Market Maker has registration should be granted. to the Market Maker;
substantially or continually failed to (4) The Exchange may grant a person (2) The Market Maker’s experience,
engage in dealings in accordance with conditional registration as a MMAT expertise and past performance in
Rule 11.8 or elsewhere in these Rules; subject to any conditions it considers making markets, including the Market
(2) The Market Maker has failed to appropriate in the interests of Maker’s performance in other securities;
meet the minimum net capital maintaining a fair and orderly market. (3) The Market Maker’s operational
conditions set forth under paragraph (b) (5) A Market Maker must ensure that capability;
above; or a MMAT is properly qualified to (4) The maintenance and
(3) The Market Maker has failed to perform market making activities, enhancement of competition among
maintain fair and orderly markets. including but not limited to ensuring the Market Makers in each security in which
(e) Any registered Market Maker may MMAT has met the requirements set they are registered;
withdraw its registration by giving forth in paragraph (b)(2) of this Rule. (5) The existence of satisfactory
written notice to the Exchange. The (c) Suspension or Withdrawal of arrangements for clearing the Market
Exchange may require a certain Registration. Maker’s transactions;
minimum prior notice period for (1) The Exchange may suspend or (6) The character of the market for the
withdrawal, and may place such other withdraw the registration previously security, e.g., price, volatility, and
conditions on withdrawal and re- given to a person to be a MMAT if the relative liquidity.
registration following withdrawal, as it Exchange determines that: (b) Voluntary Termination of Security
deems appropriate in the interests of (A) The person has caused the Market Registration. A Market Maker may
maintaining fair and orderly markets. Maker to fail to comply with the voluntarily terminate its registration in
(f) Any person aggrieved by any securities laws, rules and regulations or a security by providing the Exchange
determination under this Rule or Rules the By-Laws, Rules and procedures of with a written notice of such
11.6 or 11.7 below may seek review the Exchange; termination. The Exchange may require
under Chapter X of Exchange Rules (B) The person is not properly a certain minimum prior notice period
governing adverse action. performing the responsibilities of a for such termination, and may place
MMAT; such other conditions on withdrawal
Rule 11.6. [Types of Trading] (C) The person has failed to meet the and re-registration following
Obligations of Market Maker Authorized conditions set forth under paragraph (b) withdrawal, as it deems appropriate in
Traders above; or the interests of maintaining fair and
[Issues listed on the Exchange and (D) The Exchange believes it is in the orderly markets. A Market Maker that
those admitted to unlisted trading interest of maintaining fair and orderly fails to give advanced written notice of
privileges will be eligible for one of the markets. termination to the Exchange may be
following three types of trading: (2) If the Exchange suspends the subject to formal disciplinary action
(a) Cabinet trading; registration of a person as a MMAT, the pursuant to Chapter VIII of these Rules.
(b) Qualified dealer trading; Market Maker must not allow the person (c) The Exchange may suspend or
(c) Multiple dealer trading.] to submit orders into the System. terminate any registration of a Market
(a) General. MMATs are permitted to (3) The registration of a MMAT will be Maker in a security or securities under
enter orders only for the account of the withdrawn upon the written request of this Rule whenever the Exchange
Market Maker for which they are the ETP Holder for which the MMAT is determines that:
registered. registered. Such written request shall be (1) The Market Maker has not met any
(b) Registration of Market Maker submitted on the form prescribed by the of its obligations as set forth in these
Authorized Traders. The Exchange may, Exchange. Rules; or
upon receiving an application in writing (2) The Market Maker has failed to
from a Market Maker on a form Rule 11.7. [Cabinet Trading]
maintain fair and orderly markets.
prescribed by the Exchange, register a Registration of Market Makers in a A Market Maker whose registration is
person as a MMAT. Security suspended or terminated pursuant to
(1) MMATs may be officers, partners, [Trading in securities for which there this Rule 11.7(c) may seek review under
employees or other associated persons is no dealer participation may be Chapter X of Exchange Rules governing
of ETP Holders that are registered with provided through Exchange facilities. adverse action.
the Exchange as Market Makers. Bids and offers of members shall be (d) Nothing in this Rule will limit any
(2) To be eligible for registration as a registered in a book maintained for such other power of the Exchange under the
MMAT, a person must successfully purposes by the Exchange at a facility By-Laws, Rules, or procedures of the
Exchange with respect to the securities in which the Market Maker is Rule 11.9. [National Securities Trading
registration of a Market Maker or in registered to trade; System] Access
respect of any violation by a Market (2) Remain in good standing with the [(a) When used in Rule 11.9, unless
Maker of the provisions of this Rule. Exchange and in compliance with all the context otherwise requires—
Rule 11.8. [Qualified Dealer Trading] Exchange Rules applicable to it; (1) The term ‘‘System’’ means the
Obligations of Market Makers (3) Inform the Exchange of any National Securities Trading System, an
material change in financial or electronic securities communication
[(a) The Securities Committee may
operational condition or in personnel; and execution facility designated by the
approve one or more Proprietary
Exchange’s Board through which bids
Members of the Exchange to be a (4) Maintain a current list of MMATs and offers of competing dealers, as well
‘‘qualified dealer’’ for each designated who are permitted to enter orders on as public orders, are consolidated for
issue (as defined in Rule 11.9 of this behalf of the Market Maker and provide review and execution by Users. The
Chapter). Such qualified dealers shall an updated version of this list to the System combines the display of both the
perform the following functions: Exchange upon any change in MMATs;
(1) guarantee settlement for limit order file and current quotation/
and last sale information to Users with the
transactions occurring through the
Exchange in issues for which the (5) Clear and settle transactions matching and execution of like-priced
Proprietary Member is the qualified through the facilities of a registered orders, bids and offers according to
dealer and executes the transaction; clearing agency. This requirement may programmed price/time and agency/
(2) act as a clearing contra-party for be satisfied by direct participation, use principal priorities in order to give
transactions occurring through the of direct clearing services, or by entry Users the ability to perform the
Exchange in issues for which the into a correspondent clearing brokerage and market-making functions
Proprietary member is a qualified dealer arrangement with another ETP Holder performed on other exchanges. In
and executes the transaction; that clears trades through such agency. addition, the System provides for the
(3) provide to all members during automatic execution of orders under
(b) A Market Maker must satisfy the
Exchange trading hours a continuous predetermined conditions.
responsibilities and duties as set forth in (2) The term ‘‘Nasdaq/NNM Security’’
two-sided market in odd-lots of issues paragraph (a) of this Rule during
for which the Proprietary Member is shall mean any authorized security in
trading hours on all days in which the the Nasdaq National Market which (1)
designated a qualified dealer; and Exchange is open for business.
(4) give precedence in trading to all satisfies all applicable requirements of
public agency orders shown to the (c) A Market Maker shall be the Rule 4300 Series of the NASD Rules
qualified dealer at prices equal to or responsible for the acts and omissions and substantially meets the criteria set
better than the qualified dealer’s own of its MMATs. forth in the Rule 4300 Series of the
bid or offer. (d) If the Exchange finds any NASD Rules; (2) is subject therefore to
(b) For purposes of Rule 11.8., a substantial or continued failure by a a transaction reporting plan approved
public agency order shall mean any Market Maker to engage in a course of by the Commission; (3) has been
order for the account of a person other dealings as specified in paragraph (a) of designated therefore as a national
than a member, which order is this Rule, such Market Maker will be market system security pursuant to SEC
represented, as agent, by a member. subject to disciplinary action or Rule 11Aa2–1 and (4) as to which
(c) Qualified dealer designation shall suspension or revocation of the unlisted trading privileges have been
be used in those designated issues registration by the Exchange in one or granted pursuant to Section 12(f) of the
where there exists (i) an insufficient more of the securities in which the Act.
number of dealers to permit use of Market Maker is registered. Nothing in (3) The term ‘‘Nasdaq System’’ means
multiple dealer trading; (ii) insufficient this Rule will limit any other power of the NASD’s automated Quotation
computer capacity to permit use of the Exchange under the By-Laws, Rules, System.
multiple dealer trading; (iii) insufficient or procedures of the Exchange with (4) The term ‘‘Approved Dealer’’
order flow to warrant use of multiple respect to the registration of a Market means a Designated Dealer, a
dealer trading; or (iv) other factors Maker or in respect of any violation by Contributing Dealer, or a specialist or
which would, in the judgment of the market maker registered as such with
a Market Maker of the provisions of this
Securities Committee, make multiple another exchange or Nasdaq with
Rule. Any ETP Holder aggrieved by any
dealer trading impracticable. respect to any Designated Issue.
determination under this Rule may seek
(d) Any person aggrieved by any (5) The term ‘‘Designated Dealer’’
review under Chapter X of the Exchange
determination under this Rule may seek means a Proprietary Member who
Rules governing adverse action.
review under the provisions of maintains a minimum net capital of at
Exchange Rules for adverse action.] (e) Temporary Withdrawal. A Market least the greater of $500,000 or the
(a) General. ETP Holders who are Maker may apply to the Exchange to amount required under Rule 15c3–1 of
registered as Market Makers in one or withdraw temporarily from its Market the Securities Exchange Act of 1934, as
more securities traded on the Exchange Maker status in the securities in which amended, and who has been approved
must engage in a course of dealings for it is registered. The Market Maker must by the Securities Committee to perform
their own account to assist in the base its request on demonstrated legal market functions by entering bids and
maintenance, insofar as reasonably or regulatory requirements that offers for Designated Issues into the
practicable, of fair and orderly markets necessitate its temporary withdrawal, or System.
on the Exchange in accordance with provide the Exchange an opinion of (6) The term ‘‘Contributing Dealer’’
these Rules. The responsibilities and counsel certifying that such legal or means a Proprietary Member who (i)
duties of a Market Maker specifically regulatory basis exists. The Exchange maintains a minimum net capital of at
include, but are not limited to, the will act promptly on such request and, least the greater of $50,000 or the
following: if the request is granted, the Exchange amount required under Rule 15c3–1 of
(1) Maintain continuous limit orders may temporarily reassign the securities the Securities Exchange Act, as
to buy and to sell for round lots in those to another Market Maker. amended; (ii) is registered with the
Exchange with respect to one or more (ii) Upon request of any User, at such Rule with respect to his use of the
Designated Issues; and (iii) provides to Designated Dealer’s customary charge, System.
all Users through the System, during act as clearing contra-party for (f) Proprietary Members of the
Exchange trading hours, regular bids transactions executed through the Exchange may provide bids and offers
and offers for round lots of Designated System in Designated Issues for which for their own accounts in any
Issues for which he is registered. he is Designated Dealer. Designated Issue to all Users through
(7) The term ‘‘User’’ means a Member (iii) Provide to all Users through the the System so long as, in effecting
of the Exchange or an Approved Dealer. System, during the Exchange trading transactions on the Exchange through
Access Participant Members are hours, continuous bids and offers for the System, they comply with Section
considered to be Users in their limited round lots of Designated Issues for 11(a) of the Act and the rules and
capacity of executing transactions which he is a Designated Dealer. regulations thereunder.
through the facilities of a Proprietary (iv) Guarantee the execution of public (g) It shall be the responsibility of all
Member. agency market orders in Designated Users when trading on the Exchange for
(8) The term ‘‘Designated Issue’’ Issues for which he is Designated Dealer the account of another person to effect
means a security designated by the in accordance with subparagraph (n) of such transactions through the System.
Securities Committee to be traded in the this Rule 11.9. If there exist two or more Users may enter agency orders to buy
System. Designated Dealers in a Designated and sell in Designated Issues through
(9) The term ‘‘public agency order’’ Issue, then unless the Securities System terminals, which may have
means any order for the account of a Committee has approved one member as computer interfaces that have
person other than a member, an the primary Designated Dealer in that communications capability with the
Approved Dealer or a person who could issue, the guarantee obligation shall System and are directly linked to the
become an Approved Dealer by rotate among such Designated Dealers System.
complying with this Rule with respect (h) The System shall display all
on a daily basis. For the purposes of this
to his use of the System, which order is current principal interest and agency
subsection, market order shall include
represented, as agent, by a User. orders of Users in Designated Issues, as
marketable limit order, which is a limit
(10) The term ‘‘professional agency well as the best bid/ask quotations of
order that is immediately executable each ITS participant and Nasdaq System
order’’ means an order entered by a User because the ITS BBO or Nasdaq System
as agent for the account of a broker- BBO quotations generated by the
BBO at the time the order is entered is Nasdaq System participants in, and the
dealer, a futures commission merchant, equal to or better than the limit price on
or a member of a contract market. last sale price for, Designated Issues, to
the order. each User for purposes of trading.
(11) The term ‘‘Floor’’ means the
(v) Guarantee the execution in (1) Designated Dealers shall permit
electronically integrated System
Designated Issues that are other than each Nasdaq System market maker,
marketplace consisting of the premises
Nasdaq/NNM securities up to 1099 acting in its capacity as market maker,
on which System terminals are located
shares at the opening price of opening direct telephone access (or other such
and the System supervisory center.
(12) The term ‘‘limit order guarantee’’ public agency market orders and limit access as may be established between
means a guarantee to execute an order orders which are priced better than such the Exchange and Nasdaq System) to the
as principal upon the occurrence of a opening price (‘‘marketable limit Designated Dealer in each Nasdaq/NNM
transaction in another market at the orders’’). Guarantee the execution of Security in which such market maker is
price of such order. market orders and marketable limit registered as a market maker. Such
(13) The term ‘‘ITS BBO’’ means the orders in Designated Issues that are access shall include appropriate
best bid/ask quote among the Nasdaq/NNM securities up to 1099 procedures to assure the timely
Intermarket Trading System (‘‘ITS’’) shares at an opening price that is on or response to communications received
participants in those issues that are between the first unlocked/uncrossed through telephone access. Nasdaq
traded on ITS. Nasdaq System BBO. If there exist two System market makers may use such
(14) The term ‘‘Nasdaq System BBO’’ or more Designated Dealers in a telephone access (or other such access
means the best bid/ask quote generated Designated Issue, then, unless the as may be established between the
by the Nasdaq System participants in Securities Committee has approved one Exchange and Nasdaq System) to
those issues that are traded on the member as the primary Designated transmit orders for execution on the
Nasdaq System. Dealer in that issue, the guarantee Exchange. Executions of Nasdaq System
(b) Any class of securities listed or obligation shall rotate among such market maker orders shall be deemed to
admitted to unlisted trading privileges Designated Dealers on a daily basis. be transactions effected through the
on the Exchange shall be eligible to (d) A Proprietary Member registered System and must be reported to the
become a Designated Issue. All with the Exchange as a Contributing Exchange as promptly as possible and in
Designated Issues are eligible for odd- Dealer shall forfeit his right to continue any event within one minute of
lot, round-lot and partial round-lot as a Contributing Dealer if he fails to execution; and
executions. provide to all Users through the System, (2) Designated Dealers may send
(c) The Securities Committee shall during Exchange trading hours, regular orders from the Exchange via telephone
approve one or more applicant bids and offers for round lots of (or other access as may be established
Proprietary Members of the Exchange as Designated Issues for which he is between the Exchange and Nasdaq
a Designated Dealer for one or more registered as a Contributing Dealer. System) to any Nasdaq System market
Designated Issues. A Designated Dealer (e) Any specialist or market maker maker in each Nasdaq/NNM Security in
shall perform the following functions: registered as such with another which it displays quotations.
(i) Upon request of any User guarantee exchange or Nasdaq with respect to any (i) The System offers two modes of
settlement, at such Designated Dealer’s Designated Issue may provide bids and order interaction selected by members:
customary charge, for transactions, offers with respect to that Designated (1) If automatic execution is selected,
executed through the System in Issue through the System to all Users so the System shall match and execute
Designated Issues for which he is a long as such specialist or market maker like-priced orders, bids and offers on an
Designated Dealer. complies with the provisions of this order by order basis only at the specific
instruction of Users, including (m) It shall be the responsibility of Dealer of the Day, priced at the ITS or
Designated Dealers. each Approved Dealer or other Nasdaq System BBO when the order
(2) If order delivery and automated Proprietary Member when trading on enters the System.
response is selected, the System will the Exchange for his own account or as (6) In unusual trading situations, a
deliver contra-side orders against agent for professional agency orders in Designated Dealer may seek relief from
displayed orders and quotations on an round lots of Designated Issues to effect the requirements of 2 through 5 above
order by order basis only at the specific such transactions through the System from an Exchange Floor Official or a
instruction of Users, including and, in so doing, to yield priority to member of the Exchange staff who
Designated Dealers. To be eligible for (1) All public agency orders in the would have authority to set execution
order delivery service, Users must System at prices equal to, or better than, prices. All execution guarantees and the
demonstrate to Exchange examiners that his order, bid or offer; and requirements of Exchange Rule 12.6,
the User’s system can automatically (2) All orders, bids and offers of Customer Priority, apply only during
process the inbound order and respond Approved Dealers and other Proprietary the hours of trading on the Exchange
appropriately within 1 second. Members for their own accounts and as (8:30 a.m. to 3:05 p.m. local Chicago
(j) Limit orders to buy (sell) at a price agents for professional agency orders in time).
inferior to the ITS or Nasdaq System the System at prices better than his (o) Prior to formatting any order, bid
BBO will be executed other than at the order, bid or offer or at the same price or offer into an ITS commitment to trade
opening only after a regular way in the event any such orders, bids or and issuing such a commitment to
transaction in the Designated Issue is offers were entered in the System (i) at another ITS participant market, the
executed in another ITS participant an earlier time than his order, bid or System shall process such order, bid or
market or Nasdaq System at a price offer, or (ii) in the case of Approved offer as follows:
which is equal to or less than (greater Dealers, for the purpose of trading for (1) If a principal bid or offer, the
than) the limit price of the order. their own account against public agency System shall first exhaust all interest at
(k) Public agency orders entered in orders which such Approved Dealers or better than such bid or offer which is
the System which have not been are representing as agent pursuant to resident in the System;
subparagraph (u). (2) If a public agency market or
executed may be removed from the
(n) Public Agency Guarantee. marketable limit order, the System shall
System only by the User who entered (1) Public agency opening market first process the order pursuant to
the order for the purpose of canceling orders and limit orders better than the Exchange Rule 11.9(i) and (n) and then
the order, transferring the order to opening price in securities that are other expose for fifteen seconds any
another national market or, in the case than Nasdaq/NNM securities which are remaining balance to all Approved
of withdrawal by an Approved Dealer or entered prior to the opening up to 1099 Dealers, whether or not registered in the
Proprietary Member, executing such shares shall be executed at the opening Designated Issue involved;
order immediately as principal pursuant price. Market orders and marketable (3) If a professional agency order, the
to a limit order guarantee. Executions of limit orders in Nasdaq/NNM securities System shall exhaust all interest at or
public agency orders as principal up to 1099 shares shall be executed at better than such order which is resident
pursuant to a limit order guarantee shall an opening price on or between the first in the System and then, if the Board has
be deemed to be transactions effected on unlocked/uncrossed Nasdaq System authorized the System generation of ITS
the Exchange in the same manner as if BBO. commitments to trade, and such a
such transactions were executed (2) Public agency market and procedure is in effect, shall expose the
through the System and must be marketable limit orders in all order for fifteen seconds to all Approved
reported to the Exchange as promptly as Designated Issues which are entered Dealers, whether or not registered in the
possible and in any event within one after the opening are guaranteed Designated Issue involved.
minute of execution. execution pursuant to the following (p) Nothing in paragraphs (j) through
(l) Public agency orders to buy or sell requirements and limitations. (l) shall preclude an Approved Dealer or
at a particular price shall, in all cases (3) The Designated Dealer of the day Proprietary Member from effecting an
except execution of such an order must accept and guarantee execution on execution of a public agency order in a
pursuant to a limit order guarantee, all public agency market and marketable Designated Issue on the Exchange
have priority over all other bids and limit orders in accordance with this pursuant to a limit order guarantee.
offers on the System at the same price. subparagraph (n). (q) Confirmations. The System shall
Subject to the following condition, (4) Subject to the requirements of the provide hard-copy confirmations of
(1) All bids entered in the System short sale rule, orders must be filed on each transaction effected through the
shall be queued for execution so that the the basis of the ITS or Nasdaq System System promptly to each User (or his
highest price bid shall be the first to be BBO bid on a sell order or the ITS or agent) who is a party to that transaction,
executed and so that, in the case of bids Nasdaq System BBO offer on a buy supplying the following information:
at the same price, except in the case of order. Sell orders will be satisfied up to size, price, security, whether the User
Approved Dealer bids entered pursuant the size of the lesser of the ITS or was a buyer or a seller and the
to subparagraph (u), the bid entered Nasdaq System BBO bid or 1099 shares; transaction identification number.
earliest in time shall be the first to be buy orders up to the lesser of the ITS or (r) Access. Any User may obtain from
executed; and Nasdaq System BBO offer or 1099 the Exchange (or its designee) electronic
(2) All offers entered in the System shares. No portion of an order larger means of direct access to the System
shall be queued for execution so that the than 1099 shares is subject to the public upon the payment of such reasonable
lowest price offered shall be the first to agency guarantee. fees as the Board may specify from time
be executed and so that, in the case of (5) The number of shares which the to time in an effective rule filed with the
offers at the same price, except in the Designated Dealer of the day is obligated Securities and Exchange Commission
case of Approved Dealer offers entered to execute is reduced by the number of pursuant to Section 19(b)(2) or 19(b)(3)
pursuant to subparagraph (u), the offer shares executed in the System against of the Act.
entered earliest in time shall be the first any agency or principal interest, (s) The Board shall be responsible for
to be executed. including interest of the Designated the supervision of the National
Securities Trading System including the market (NOTE: Orders will be executed declared with respect to the component
following: in whole or in part, based on the rules securities of the stock index or portfolio
(1) Affording to any person adversely of priority and precedence, on a share of securities underlying the Portfolio
affected by any prohibition or limitation for share basis with trades executed at Depository Receipts, less certain
with respect to access to services offered the limit price in the primary market); expenses and other charges as set forth
by the Exchange or any member in (b) There has been a price penetration in the Trust prospectus.
connection with the System the of the limit in the primary market; or (b) Reporting Authority. The term
procedural rights available under (c) The issue is trading at the limit ‘‘Reporting Authority’’ in respect of a
Exchange Rules for adverse action. price on the primary market, unless it particular series of Portfolio Depositary
(2) Requiring all persons participating can be demonstrated that such order Receipts means the Exchange, an
in the System to maintain such would not have been executed if it had institution (including the Trustee for a
additional records and to provide such been transmitted to the primary market series of Portfolio Depositary Receipts),
access to those records as the Exchange or the customer and the Designated or a reporting service designated by the
shall determine are in the public Dealer agree to a specific volume related Exchange, or by the exchange that lists
interest or appropriate for the protection or other criteria for requiring a fill. a particular series of Portfolio
of investors and the maintenance of fair (d) With respect to paragraph (c) Depository Receipts (if the Exchange is
and orderly markets. above, if the issue has traded in a trading such series pursuant to unlisted
(3) Requiring all Users participating in primary market’s after-hours closing trading privileges) as the official source
the System to comply with all Exchange price trading session, the Designated for calculating and reporting
Rules. Approved Dealers and Dealer shall fill limit orders designated information relating to such series,
Proprietary Members shall apprise as eligible for limit order protection including, but not limited to, any
customers promptly when they have based on volume that prints in a current index or portfolio value; the
acted as principal in effecting primary market’s after-hours closing current value of the portfolio of
transactions with customers, unless price trading session (a ‘‘GTX’’ order) at securities required to be deposited to
earlier notification and consent is such limit price. In unusual trading the Trust in connection with issuance of
required by law. situations, a Designated Dealer may seek Portfolio Depositary Receipts; the
(t) Neither the Exchange nor its relief from the above requirements from amount of any dividend equivalent
agents, employees or contractors shall two Trading Practices Committee payment or cash distribution to holders
be liable to its members, member members or a designated member of the of Portfolio Depositary Receipts, net
organizations, successors, Exchange staff who would have the asset value, or other information relating
representatives or customers thereof, or authority to set execution prices. to the creation, redemption or trading of
any persons associated therewith, for (v)(1) Applicability. This rule is Portfolio Depositary receipts.
any claims arising out of the use or applicable only to Portfolio Depositary (3) Members and member
enjoyment by such member, member Receipts. Except to the extent organizations shall provide to all
organization, successor, representative, inconsistent with this rule, or unless the purchasers of a series of Portfolio
customer, or associated person, of the context otherwise requires, the Depositary Receipts a written
facilities afforded by the Exchange, provisions of the Constitution and all description of the terms and
including, without limitation, the other rules and policies of the Board characteristics of such securities, in a
National Securities Trading System and shall be applicable to the trading on the form approved by the Exchange, not
the Automated Extension Processing Exchange of such securities. Portfolio later than the time a confirmation of the
System. Depositary Receipts are included within first transaction in such a series is
(u) Public agency market and the definition of ‘‘security’’ or delivered to such purchaser. In
marketable limit orders which an ‘‘securities’’ as such terms are used in addition, members and member
Approved Dealer represents as agent the Constitution and Rules of the organizations shall include such a
may be preferenced to such Approved Exchange. written description with any sales
Dealer in accordance with the price- (2) Definitions. The following terms as material relating to a series of Portfolio
time and agency/principal priorities set used in the Rules shall, unless the Depositary Receipts that is provided to
forth in Rule 11.9(l) and (m). context otherwise requires, have the customers or the public. Any other
Notwithstanding subparagraphs (c) and meanings herein specified: written materials provided by a member
(n), an Approved Dealer shall be Dealer (a) Portfolio Depositary Receipt. The or member organization to customers or
of the day with respect to orders term ‘‘Portfolio Depositary Receipt’’ to the public making specific reference
preferenced under this subparagraph means a security (i) that is based on a to a series of Portfolio Depositary
(u). unit investment trust (‘‘Trust’’) which Receipts as an investment vehicle must
Additionally, Designated Dealers shall holds the securities which comprise an include a statement in substantially the
be allowed to preference their customer index or portfolio underlying a series of following form: ‘‘A circular describing
order flow that is related to index Portfolio Depositary Receipts; (ii) that is the terms and characteristics of [the
arbitrage only on plus or zero plus ticks issued by the Trust in a specified series of Portfolio Depositary Receipts]
when the Dow Jones Industrial Average aggregate minimum number in return is available from your broker. It is
(‘‘DJIA’’) declines by 50 points or more for a ‘‘Portfolio Deposit’’ consisting of recommended that you obtain and
from the previous day’s closing value. specified numbers of shares of stock review such circular before purchasing
Interpretations and Policies plus a cash amount; (iii) that, when [the series of Portfolio Depositary
aggregated in the same specified Receipts]. In addition, upon request you
.01 Limit Order Protection minimum number, may be redeemed may obtain from your broker a
Public agency limit orders in from the Trust which will pay to the prospectus for [the series of Portfolio
securities other than Nasdaq/NNM redeeming holder the stock and cash Depositary Receipts].’’
Securities shall be filled if one of the then comprising the ‘‘Portfolio Deposit’’; A member or member organization
following conditions occur: and (iv) that pays holders a periodic carrying omnibus account for a non-
(a) The bid or offering at the limit cash payment corresponding to the member broker-dealer is required to
price has been exhausted in the primary regular cash dividends or distributions inform such non-member that execution
of an order to purchase a series of condition exists which in the opinion of Portfolio Depositary Receipts or any
Portfolio Depositary Receipts for such the Exchange, makes future dealings on underlying index or data included
omnibus account will be deemed to the Exchange inadvisable. therein and the Exchange makes no
constitute agreement by the non- Upon termination of a Trust, the express or implied warranties, and
member to make such written Exchange requires that Portfolio disclaims all warranties or
description available to its customers on Depositary Receipts issued in merchantability or fitness for a
the same terms as are directly applicable connection with such Trust be removed particular purpose with respect to
to members and member organizations from Exchange listing or have their Portfolio Depositary Receipts or any
under this rule. unlisted trading privileges terminated. underlying index or data included
Upon request of a customer, a member A Trust may terminate in accordance therein. This limitation of liability shall
or member organization shall also with the provisions of the Trust be in addition to any other limitation
provide a prospectus for the particular prospectus, which may provide for contained in the Exchange’s Articles of
series of Portfolio Depositary Receipts. termination if the value of securities in Incorporation, By-Laws or Rules.
(4) Designation of an Index or the Trust falls below a specified
Portfolio. The trading of Portfolio amount. Interpretations and Policies
Depositary Receipts based on one or (c) Term—The stated term of the Trust .01 The Exchange will trade
more stock indices or securities shall be stated in the Trust Prospectus. pursuant to unlisted trading privileges,
portfolios, whether by listing or However, a Trust may be terminated Portfolio Depositary Receipts based on
pursuant to unlisted trading privileges, under such earlier circumstances as may the Standard and Poor’s Corporation’s
shall be considered on a case by case be specified in the Trust prospectus. S&P 500 Index, known as SPDRs.
basis. The Portfolio Depositary Receipts (d) Trustee—The trustee must be a .02 The Exchange will trade,
based on each particular stock index or trust company or banking institution pursuant to unlisted trading privileges,
portfolio shall be designated as a having substantial capital and surplus Portfolio Depositary Receipts based on
separate series and shall be identified by and the experience and facilities for the Standard and Poor’s Corporation’s
a unique symbol. The stocks that are handling corporate trust business. In S&P MidCap 400 Index, known as
included in an index or portfolio on cases where, for any reason, an MidCap SPDRs.
which Portfolio Depositary Receipts are individual has been appointed as ‘‘Standard & Poor’s’’, ‘‘S&P’’, ‘‘S&P
based shall be selected by the Exchange trustee, a qualified trust company or 500’’, ‘‘Standard & Poor’s 500’’, and
or by such other person as shall have a banking institution must be appointed ‘‘500’’ are trademarks of the McGraw-
proprietary interest in and authorized as co-trustee. Hill Companies, Inc. and have been
use of such index or portfolio, and may (e) Voting—Voting rights shall be as licensed for use by the Exchange.
be revised from time to time as may be set forth in the Trust prospectus. The (w)(1) Applicability. This rule is
deemed necessary or appropriate to Trustee of a Trust may have the right to applicable only to Trust Issued Receipts.
maintain the quality and character of vote all of the voting securities of such Except to the extent inconsistent with
the index or portfolio. Trust. this rule, or unless the context
(5) Initial and Continued Listing and/ (6) Limitation of Exchange Liability. otherwise requires, the provisions of the
or Trading. A Trust upon which a series Neither the Exchange, the Reporting Constitution and all the rules and
of Portfolio Depositary Receipts is based Authority nor any agent of the Exchange policies of the Board shall be applicable
will be traded on the Exchange, whether shall have any liability for damages, to the trading on the Exchange of such
by listing or pursuant to unlisted trading claims, losses or expenses caused by securities. Trust Issued Receipts are
privileges, subject to application of the any errors, omissions, or delays in included within the definition of
following criteria: calculating or disseminating any current ‘‘security’’ or ‘‘securities’’ as such terms
(a) Commencement of Trading—For index or portfolio value, the current are used in the Constitution and Rules
each Trust, the Exchange will establish value of the portfolio of securities of the Exchange. The Exchange will
a minimum number of Portfolio required to be deposited to the Trust; consider for trading, whether by listing
Depositary Receipts required to be the amount of any dividend equivalent or pursuant to unlisted trading
outstanding at the time of payment or cash distribution to holders privileges, Trust Issued Receipts that
commencement of trading on the of Portfolio Depositary Receipts; net meet the criteria of this Rule.
Exchange. asset value; or other information relating (2) Definitions. The following terms as
(b) Continued Trading—Following the to the creation redemption or trading of used in the Rules shall, unless the
initial twelve month period following Portfolio Depositary Receipts, resulting context otherwise requires, have the
formation of a Trust and from any negligent act or omission by following meanings herein specified:
commencement of trading on the the Exchange, or the Reporting (a) Trust Issued Receipt. A Trust
Exchange, the Exchange will consider Authority, or any agent of the Exchange Issued Receipt is a security (a) that is
the suspension of trading in, removal or any act, condition or cause beyond issued by a trust (‘‘Trust’’) which holds
from listing of, or termination of the reasonable control of the Exchange specific securities deposited with the
unlisted trading privileges for a Trust or its agent, or the Reporting Authority, Trust; (b) that when aggregated in some
upon which a series of Portfolio including, but not limited to, an act of specified minimum number, may be
Depositary Receipts is based under any God; fire; flood; extraordinary weather surrendered to the Trust by the
of the following circumstances: (i) If the conditions; war; insurrection; riot; beneficial owner to receive the
Trust has more than 60 days remaining strike; accident; action of government; securities; and (c) that pays beneficial
until termination and there are fewer communications or power failure; owners dividends and other
than 50 record and/or beneficial holders equipment or software malfunction; or distributions on the deposited
of Portfolio Depositary Receipts for 30 any error, omission or delay in the securities, if any are declared and paid
or more consecutive trading days; or (ii) reports of transactions in one or more of to the trustee by an issuer of the
if the value of the index or portfolio of the underlying securities. The Exchange deposited securities.
securities on which the Trust is based makes no warranty, express or implied, (3) Designation. The Exchange may
is no longer calculated or available; or as to the results to be obtained by any trade, whether by listing or pursuant to
(iii) if such other event shall occur or person or entity from the use of unlisted trading privileges, Trust Issued
Receipts based on one or more (e) Voting—Voting rights shall be set context otherwise requires, have the
securities. The Trust Issued Receipts forth in the Trust prospectus. meanings herein specified:
based on particular securities shall be (5) Member Obligations. Members and (a) Index Fund Shares means a
designated as a separate series and shall member organizations shall provide to security (a) that is issued by an open-
be identified by a unique symbol. The all purchasers of newly issued Trust end management investment company
securities that are included in a series Issued Receipts a prospectus for the based on a portfolio of stocks that seeks
of Trust Issued Receipts shall be series of Trust Issued Receipts. to provide investment results that
selected by the Exchange or by such (6) Trading Issues. Trust Issued correspond generally to the price and
other person as shall have a proprietary Receipts may be acquired, held, or yield performance of a specified foreign
interest in such Trust Issued Receipts. transferred only in round-lot amounts or domestic stock index; (b) that is
(4) Initial and Continued Listing. (or round-lot multiples) of 100 receipts. issued by such an open-end
Trust Issued Receipts will be traded on Orders for less than a round-lot management investment company in a
the Exchange subject to application of multiple, will be executed to the extent specified aggregate minimum number in
the following criteria: of the largest round-lot multiple. return for a deposit of specified
(a) Initial Listing—For each Trust, the numbers of shares of stock and/or a cash
Exchange will establish a minimum Interpretations and Policies amount with a value equal to the next
number of Trust Issued Receipts .01 The Exchange may approve a determined net asset value; and (c) that,
required to be outstanding at the time of series of Trust Issued Receipts for when aggregated in the same specified
commencement of trading on the trading, whether by listing or pursuant minimum number, may be redeemed at
Exchange. to unlisted trading privileges, pursuant a holders request by such open-end
(b) Continued Listing—Following the to Rule 19b–4(e) under the Securities investment company which will pay to
initial twelve month period following Act of 1934, provided that the following the redeeming holder the stock and/or
formation of a Trust and criteria are satisfied: cash with a value equal to the next
commencement of trading on the (a) Each security underlying the Trust determined net asset value.
Exchange, the Exchange will consider Issued Receipt must be registered under (b) Reporting Authority. The term
the suspension of trading in or removal Section 12 of the Exchange Act; ‘‘Reporting Authority’’ in respect of a
from listing of a Trust upon which a (b) Each company whose securities particular series of Index Fund Shares
series of Trust Issued Receipts is based are underlying securities for the Trust means the Exchange, a subsidiary of the
under any of the following Issued Receipt must have a minimum Exchange, or an institution or reporting
circumstances: (i) If the Trust has more public float of at least $150 million; service designated by the Exchange or
than 60 days remaining until (c) Each security underlying the Trust its subsidiary as the official source for
termination and there are fewer than 50 Issued Receipt must be listed on a calculating and reporting information to
record and/or beneficial holders of Trust national securities exchange or traded such series, including, but not limited
Issued Receipts for 30 or more through the facilities of NASDAQ as a to, any current index or portfolio value;
consecutive trading days; (ii) if the Trust reported national market system the current value of the portfolio of any
has more than 50,000 receipts issued security; securities required to be deposited in
and outstanding; (iii) if the market value (d) Each company whose securities connection with issuance of Index Fund
of all receipts issued and outstanding is are underlying securities for the Trust Shares; the amount of any dividend
less than $1,000,000; or (iv) if any other Issued Receipt must have an average equivalent payment or cash distribution
event shall occur or condition exists daily trading volume of at least 100,000 to holders of Index Fund Shares, net
which, in the opinion of the Exchange, shares during the preceding sixty-day asset value, or other information relating
makes further dealings on the Exchange trading period; to the issuance, redemption or trading of
inadvisable. (e) Each company whose securities Index Fund Shares.
Upon termination of a Trust, the are underlying securities for the Trust Nothing in this section shall imply
Exchange requires that the Trust Issued Issued Receipt must have an average that an institution or reporting service
Receipts issued in connection with such daily dollar value of shares traded that is the source for calculating and
Trust be removed from Exchange listing. during the preceding sixty-day trading reporting information relating to Index
A Trust may terminate in accordance period of at least $1 million; and Fund Shares must be designated by the
with the provisions of the Trust (f) The most heavily weighted security Exchange, the term ‘‘Reporting
prospectus, which may provide for in the Trust Issued Receipt cannot Authority’’ shall not refer to an
termination if the value of securities in initially represent more than 20% of the institution or reporting service not so
the Trust falls below a specified overall value of the Trust Issued designated.
amount. Receipt. (3) Disclosure. Upon request of a
(c) Term—The stated term of the Trust (x) Index Fund Shares customer, members and member
shall be as stated in the Trust (1) Applicability. This Chapter is organizations shall provide to all
prospectus; however, a Trust may be applicable only to Index Fund Shares. purchasers of Index Fund Shares a
terminated under such earlier Except to the extent inconsistent with prospectus for the series of Index Fund
circumstances as may be specified in this Chapter, or unless the context Shares.
the Trust prospectus. otherwise requires, the provisions of the (4) Designation. The trading of Index
(d) Trustee—The Trustee must be a Constitution and all other rules and Fund Shares based on one or more
trust company or banking institution policies of the Exchange shall be securities, whether by listing or
having substantial capital and surplus applicable to the trading on the pursuant to unlisted trading privileges,
and the experience and facilities for Exchange of Index Fund Shares. Index shall be considered on a case-by-case
handling corporate trust business. In Fund Shares are included within the basis. Each issue of Index Fund Shares
cases where, for any reason, an definition of ‘‘security’’ or ‘‘securities’’ shall be based on each particular stock
individual has been appointed as as such terms are used in the index or portfolio and shall be a
trustee, a qualified trust company or Constitution and Rules of the Exchange. designated as a separate series and shall
banking institution must be appointed (2) Definitions. The following terms as be identified by a unique symbol. The
co-trustee. used in the Rules shall, unless the securities that are included in a series
of Index Fund Shares shall be selected such fund: (i) Component stocks that in (g) Surveillance Procedures. The
by the Exchange or its agent, a wholly- the aggregate account for at least 90% of Exchange will utilize existing
owned subsidiary of the Exchange, or by the weight of the index or portfolio shall surveillance procedures for Index Fund
such other person thereof, as shall have have a minimum market value of at least Shares.
authorized use of such index. Such $75 million; (ii) The component stocks (h) Applicability of Other Rules. The
index or portfolio may be revised from shall have a minimum monthly trading provisions of the Exchange Rules and
time to time as may be deemed volume during each of the last six By-Laws will apply to all series of Index
necessary or appropriate to maintain the months of at least 250,000 shares for Fund Shares.
quality and character of the index or stocks representing at least 90% of the .02 The following paragraphs only
portfolio. weight of the index or portfolio; (iii) The apply to series of Index Fund Shares
(5) Initial and Continued Listing and/ most heavily weighted component stock that are the subject of an order by the
or Trading. Each series of Index Fund cannot exceed 25% of the weight of the Securities and Exchange Commission
Shares will be traded on the Exchange, index or portfolio, and the five most exempting such series from certain
whether by listing or pursuant to heavily weighted component stocks prospectus delivery requirements under
unlisted trading privileges, subject to cannot exceed 65% of the weight of the Section 24(d) of the Investment
application of the following criteria: index or portfolio; (iv) The underlying Company Act of 1940. The Exchange
(a) Commencement of Trading—For index or portfolio must include a will inform members and member
each Series, the Exchange will establish minimum of 13 stocks; and (v) All organizations regarding application of
a minimum number of Index Fund securities in an underlying index or these provisions to a particular series of
Shares required to be outstanding at the portfolio must be listed on a national Index Fund Shares by means of an
time of commencement of trading on the securities exchange or The Nasdaq Information Circular prior to
Exchange. Stock Market (including the Nasdaq commencement of trading in such
(b) Continued Trading—Following the SmallCap Market). series. The Exchange requires that
initial twelve month period following members and member organizations
(b) Index Methodology and
commencement of trading on the provide to all purchasers of a series of
Calculation. (i) The index underlying a
Exchange of a series of Index Fund Index Fund Shares a written description
series of Index Fund Shares will be
Shares, the Exchange will consider the of the terms and characteristics of such
calculated based on either the market
suspension of trading, the removal from securities, in a form prepared by the
capitalization, modified market
listing, or termination of unlisted open-end management investment
capitalization, price, equal-dollar or
trading privileges for such series under company issuing such securities, not
modified equal-dollar weighting
any of the following circumstances: (i) later than the time a confirmation of the
methodology; (ii) If the index is
If there are fewer than 50 beneficial first transaction in such series is
maintained by a broker-dealer, the
holders of the series of Index Fund delivered to such purchaser. In
broker-dealer shall erect a ‘‘fire-wall’’
Shares for 30 or more consecutive addition, members and member
around the personnel who have access
trading days; (ii) if the value of the organizations shall include such a
to information concerning changes and
index or portfolio of securities on which written description with any sales
adjustments to the index and the index
the series of Index Fund Shares is based material relating to a series of Index
shall be calculated by a third party who
is no longer calculated or available; or Fund Shares that is provided to
is not a broker-dealer; and (iii) The customers or the public. Any other
(iii) if such other event shall occur or
current index value will be written materials provided by a member
condition exist which, in the opinion of
disseminated every 15 seconds over the or member organization to customers or
the Exchange, makes further dealings on
Consolidated Tape Association’s the public making specific reference to
the Exchange inadvisable. Upon
Network B. a series of Index Fund Shares as an
termination of an open-ended
(c) Disseminated Information. The investment vehicle must include a
management investment company, the
Reporting Authority will disseminate statement in substantially the following
Exchange requires that Index Fund
for each series of Index Fund Shares an form: ‘‘A circular describing the terms
Shares issued in connection with such
estimate, updated every 15 seconds, of and characteristics of [the series of
entity be removed from Exchange
the value of a share of each series. This Index Fund Shares] has been prepared
listing.
(c) Voting. Voting rights shall be as set may be based, for example, upon by the [open-end management
forth in the applicable open-end current information regarding the investment company name] and is
management investment company required deposit of securities and cash available from your broker or the
prospectus. amount to permit creation of new shares Exchange. It is recommended that you
of the series or upon the index value. obtain and review such circular before
Interpretations and Policies (d) Initial Shares Outstanding. A purchasing [the series of Index Fund
.01 The Exchange may approve a minimum of 100,000 shares of a series Shares].’’
series of Index Fund Shares for listing of Index Fund Shares is required to be A member or member organization
pursuant to Rule 19b–4(e) under the outstanding at commencement of carrying an omnibus account for a non-
Securities Exchange Act of 1934 trading. member broker-dealer is required to
provided each of the following criteria (e) Minimal Fractional Trading inform such non-member that execution
is satisfied: Variation. The minimum fractional of an order to purchase a series of Index
(a) Eligibility Criteria for Index trading variation may vary among Fund Shares for such omnibus account
Components. Upon the initial listing of different series of Index Fund Shares will be deemed to constitute agreement
a series of Index Fund Shares each but will be set at 1⁄16th, 1⁄32nd, or 1⁄64th by the non-member to make such
component of an index or portfolio of $1.00. written description available to its
underlying a series of Index Fund (f) Hours of Trading. Trading will customers on the same terms as are
Shares shall meet the following criteria occur between 9:30 a.m. and either 4 directly applicable to members and
as of the date of the initial deposit of p.m. or 4:15 p.m. for each series of member organizations under this rule.
securities to the fund in connection Index Fund Shares, as specified by the Upon request of a customer, member
with the initial issuance of shares of Exchange. or member organization shall also
provide a prospectus for the particular shall comply with the Exchange’s charged the per share incremental rates
series of Index Fund Shares.] Articles of Incorporation, By-Laws, as noted below for public agency
(a) General. The System shall be Rules and procedures, as if Sponsored transactions:
available for entry and execution of Participant were an ETP Holder.
orders by Users with authorized access. (D) Sponsored Participant shall Avg. daily share * volume Charge per
To obtain authorized access to the maintain, keep current and provide share
System, each User must enter into a upon request to the Sponsoring ETP
1 to 250,000 ............................... $0.0015
User Agreement with the Exchange in Holder and the Exchange a list of 250,001 to 500,000 .................... 0.0013
such form as the Exchange may provide Authorized Traders who may obtain 500,001 to 750,000 .................... 0.0009
(‘‘User Agreement’’). access to the System on behalf of the 750,001 to 1,250,000 ................. 0.0007
(b) Sponsored Participants. A Sponsored Participant. Sponsored 1,250,001 and higher ................. 0.0005
Sponsored Participant may obtain Participant shall be subject to the
authorized access to the System only if * Odd-Lot Shares Excluded.
obligations of Rule 11.10 with respect to
such Sponsored Participant is a such Authorized Traders. (b) Odd-Lot Transactions. Members
registered broker or dealer and a self- (E) Sponsored Participant shall will be charged $0.50 per odd-lot
clearing member of a Qualified Clearing familiarize its Authorized Traders with transaction when acting as agent or
Agency, and only if such access is all of the Sponsored Participant’s principal, except that members will earn
authorized in advance by one or more obligations under this Rule and will a credit of $0.50 for every four round-
Sponsoring ETP Holders as follows: assure that they receive appropriate lot transactions executed (agency,
(1) Sponsored Participants must enter training prior to any use or access to the professional agency or principal) on the
into and maintain customer agreements System. Exchange and printed on the
with one or more Sponsoring ETP (F) Sponsored Participant may not Consolidated Tape by the Exchange.
Holders establishing proper permit anyone other than Authorized Notwithstanding the forgoing credit,
relationship(s) and account(s) through Traders to use or obtain access to the there will be a minimum charge of $0.10
which the Sponsored Participant may System. per odd-lot transaction.
trade on the System. Such customer (G) Sponsored Participant shall take (c) Agency Order Mix Fee. Agency
agreement(s) must incorporate the reasonable security precautions to limit orders shall be charged based on
Sponsorship Provisions set forth in prevent unauthorized use or access to the percentage of public agency market
paragraph (2) below. the System, including unauthorized
(2) For a Sponsored Participant to order shares executed on the Exchange
entry of information into the System, or during the trading month, according to
obtain and maintain authorized access the information and data made
to the System, a Sponsored Participant the following schedule:
available therein. Sponsored Participant
and its Sponsoring ETP Holder must understands and agrees that Sponsored Percent of market order Agency limit order
agree in writing to the following Participant is responsible for any and shares executed mix fee
Sponsorship Provisions: all orders, trades and other messages
(A) Sponsored Participant and its and instructions entered, transmitted or 25 and higher ................ No Charge.
Sponsoring ETP Holder must have received under identifiers, passwords 20 to 24.99 .................... $0.005 per share.
entered into and maintained a User and security codes of Authorized 15 to 19.99 .................... $0.010 per share.
Agreement with the Exchange. The 10 to 14.99 .................... $0.015 per share.
Traders, and for the trading and other Less than 10 ................. $0.020 per share.
Sponsoring ETP Holder must designate consequences thereof.
the Sponsored Participant by name in (H) Sponsored Participant
its User Agreement as such. acknowledges its responsibility to (d) Professional Agency Transactions.
(B) Sponsoring ETP Holder establish adequate procedures and Members will be charged $0.0025 per
acknowledges and agrees that controls that permit it to effectively share ($0.25/100 shares) for professional
(i) All orders entered by the monitor its employees, agents and agency (Rule 11.9(a)(8)) transactions.
Sponsored Participants and any person customers’ use and access to the System (e) Crosses and Meets
acting on behalf of or in the name of for compliance with the terms of this (1) Users executing crosses and meets
such Sponsored Participant and any agreement. in Tape A securities shall be charged
executions occurring as a result of such (3) The Sponsoring ETP Holder must $0.0005 per share per side for average
orders are binding in all respects on the provide the Exchange with a written daily volume up to 5 million shares per
Sponsoring ETP Holder, statement in form and substance day and $0.000025 per share per side for
(ii) Sponsoring ETP Holder is average daily volume up above 5
acceptable to the Exchange
responsible for any and all actions million shares, with a maximum charge
acknowledging its responsibility for the
taken by such Sponsored Participant of $37.50 per firm per side of
orders, executions and actions of its
and any person acting on behalf of or transaction.
Sponsored Participant at issue,
in the name of such Sponsored
including without limitation (2) Users, who are not registered as
Participant, and
responsibility to clear and settle the Qualified or Designated Dealers in the
(iii) Sponsoring ETP Holder shall pay
Sponsored Participant’s trades in the securities in which they are executing
when due all amounts, if any, payable
event that the Sponsored Participant or crosses and meets in Tape C securities
to the Exchange or any other third
its Qualified Clearing Agency does not (Nasdaq NM and SmallCap securities),
parties that arise from the Sponsored
accept any such trades. shall pay no transaction fees.
Participants access to and use of the
System. Such amounts include, but are Rule 11.10. [National Securities Trading (3) Dealers executing crosses in Tape
not limited to applicable exchange and System Fees] Authorized Traders C securities (Tape ‘‘C’’ Transactions are
regulatory fees. defined as transactions conducted in

(C) Sponsoring ETP Holder shall [A. Trading Fees Nasdaq securities pursuant to unlisted
comply with the Exchange’s Articles of (a) Agency Transactions. As in the trading privileges) in which they are
Incorporation, By-Laws, Rules and case for Preferenced transactions, registered shall be charged a per share
procedures, and Sponsored Participant members acting as an agent will be fee as noted below:
Fee per transactions and are subject to the (n) NSTS Internal Customer Port
Average daily number of shares share following incremental rates: Charge. For purposes of this charge, a
‘‘Port’’ shall be defined as a TCP/IP
Up to 5 million shares ................ $0.001 Avg. daily principal share** Charge per address. For each port utilized on the
5 million shares and above ........ 0.000025 volume share Exchange mainframe a $350.00 per
Up to 5 million shares ................ $0.001
month charge will be assessed to the
(4) Users executing crosses and meets
in Tape A, B or C securities through the 5 million shares and above ........ 0.000025 member.
(o) Technology Fee. Every Member of
Exchange’s System Supervisory Center ** Odd-lot shares excluded. the Exchange shall be assessed a fee of
shall be charged $15 per contra-party, $1,250.00 per month to help offset
(i) Transaction Fee Cap. The monthly
up to a maximum of $75 per side of
transaction fees charged to each member technology expenses incurred by the
transaction. This transaction fee shall be Exchange.
shall be equal to the lesser of (1) the
in lieu of any transaction fee otherwise (p) Clearing Related Fee Passed
amounts assessed pursuant to
applicable under Paragraphs (A)(e)(1) Through to Member. The Exchange will
Paragraphs (A)(a) through (A)(h) of this
through (A)(e)(3) above. Rule 11.10 or (2) $50,000. pass onto members the entire amount of
(f) ITS Transactions. All ITS (j) Revenue Sharing Program. After the clearing related fees allocated to the
transactions, whether inbound or the Exchange earns total operating Exchange by the clearing agent for
outbound, will be charged $0.001 per revenue sufficient to offset actual transactions which the Exchange
share. expenses and working capital needs, a submits to clearing on behalf of
(g) Proprietary (Principal) percentage of all Specialist Operating members.
Transactions. Revenue (‘‘SOR’’) shall be eligible for (q) Regulatory Transaction Fee. Under
(1)(A) All Designated Dealers in sharing with Designated Dealers. SOR is Section 31 of the Act, the Exchange
securities other than Nasdaq securities, defined as operating revenue that is must pay certain fees to the
except those acting as Preferencing generated by specialist firms. SOR Commission. To help fund the
Dealers or Contributing Dealers, will be consists of transaction fees, book fees, Exchange’s obligations to the
charged $0.001 per share ($0.10/100 technology fees, and market data Commission under Section 31, this
shares) for principal transactions. revenue that is attributable to specialist Regulatory Transaction Fee is assessed
(B) For a pilot period commencing firm activity. SOR shall not include any to members. To the extent there may be
October 1, 2002 and lasting through investment income or regulatory any excess monies collected under this
June 30, 2006, members that execute monies. The sharing of SOR shall be Rule, the Exchange may retain those
orders in Nasdaq securities against based on each Designated Dealer’s pro monies to help fund its general
previously displayed quotes/orders of rata contribution to SOR in excess of operating expense. Each member
other members shall pay $0.004 per $75,000 per quarter. In no event shall engaged in executing transactions on the
share for such execution. The Exchange the amount of revenue shared with Exchange shall pay, in such manner and
shall pass on to the member displaying Designated Dealers exceed SOR. To the at such times as the Exchange shall
the quote/order executed against $0.003 extent market data revenue is subject to direct, a Regulatory Transaction Fee
per share and the Exchange shall retain any adjustment, SOR revenue may be equal to (i) the rate determined by the
$0.001 per share. adjusted accordingly. Commission to be applicable to covered
(2) Designated Dealers acting as (k) Tape ‘‘B’’ Transactions. Except as sales occurring on the Exchange in
‘‘Dealer of the Day’’ will be charged provided in Paragraph (A)(e)(4) above, accordance with Section 31 of the Act
$0.0025 per share ($0.25/100 shares) for the Exchange will not impose a multiplied by (ii) the member’s
principal transactions. transaction fee on Consolidated Tape aggregate dollar amount of covered sales
(3) Contributing Dealers will be ‘‘B’’ securities. In addition, Members occurring on the Exchange during any
charged $0.02 per share ($2.00/100 will receive a 50 percent pro rata computational period.
shares) for principal transactions. transaction credit of gross Tape ‘‘B’’ (r) Workstation Fee. Every member
(4) Members executing principal revenue; provided that, however, using the Exchange Workstation shall be
transactions in securities for which they calculation of the transaction credit will charged $1,000.00 per device per
are not registered as a Designated or be based on net Tape ‘‘B’’ revenues in month.
Contributing Dealer will be charged those fiscal quarters where the overall B. Membership Fees.
$0.02 per share ($2.00/100 shares). revenue retained by the Exchange does
(h)(1) Preferenced Transactions. not offset actual expenses and working
Item Fee
Designated Dealers that are preferencing capital needs. To the extent market data Yearly Membership Dues (Quar-
transactions in Tape A securities are revenue from Tape ‘‘B’’ transactions is terly Charge $625) .................. $2,500
charged for one side of their preferenced subject to any adjustment, credits New Member Application Fee .... 1,000
transactions and are subject to the provided under this program may be Transfers ..................................... 350
incremental rates as noted below: adjusted accordingly. Responsible Party Change
(l) Reserved. Firm Registration/Name Change
Avg. daily principal share* Charge per
volume share (m) DD Issue/Book Fees. Designated
Dealers will be charged a monthly book C. Transaction Credit De Minimis. For
1 to 250,000 ............................... $0.0015 fee based on the following incremental all rebates applicable to Tape A and
250,001 to 500,000 .................... 0.0013 schedule: Tape B Transactions, no member shall
500,001 to 750,000 .................... 0.0009 be eligible for a rebate for any quarter
750,001 to 1,250,000 ................. 0.0007 Fee per unless the total rebate calculation for
Number of issues
1,250,001 and higher ................. 0.0005 issue that quarter exceeds $500.00.]
(a) An ETP Holder shall maintain a

* Odd-lot shares excluded. 0 to 150 ...................................... $30.00 list of ATs who may obtain access to the
(2) Dealers executing preferencing 151 to 300 .................................. 20.00 System on behalf of the ETP Holder or
301 to 500 .................................. 15.00
transactions in Tape C securities are 501 and higher ........................... 2.00
the ETP Holder’s Sponsored
charged for one side of their preferenced Participants. The ETP Holder shall
update the list of ATs as necessary. ETP business on the Exchange as determined quotations in the NSX Book and at away
Holders must provide the list of ATs to pursuant to Rule 11.1, or after the trading centers to be executed in
the Exchange upon request. closing of the regular trading session for accordance with Rule 11.15(b).
(b) An ETP Holder must have such security on its Listing Exchange, (B) A Full Sweep Order will be
reasonable procedures to ensure that all will be rejected. converted into one or more limit orders
ATs comply with all Exchange Rules (3) Day + Order. A limit order to buy with sizes equal to the sizes of the best
and all other procedures related to the or sell which, if not executed, expires at available quotations (including manual
System. the closing of business on the Exchange quotations) in the NSX Book and at
(c) An ETP Holder must suspend or (as determined pursuant to Rule 11.1) away trading centers in accordance with
withdraw a person’s status as an AT if on the day on which it was entered. Any Rule 11.15(b).
the Exchange has determined that the Day + Order entered into the System (C) A Destination Sweep Order will be
person has caused the ETP Holder to before the opening of business or after routed to an away trading center
fail to comply with the Rules of the the closing of business on the Exchange specified by the User, after the order is
Exchange and the Exchange has as determined pursuant to Rule 11.1 exposed to the NSX Book.
directed the ETP Holder to suspend or will be rejected. (ii) When entering a Protected Sweep
withdraw the person’s status as an AT. (4) Any limit orders entered with a Order or Full Sweep Order, Users shall
(d) An ETP Holder must have ‘‘Good ’til Cancel’’ (GTC) or similar designate the Sweep Order as ‘‘Sweep
reasonable procedures to ensure that time-in-force term will be automatically and Post,’’ ‘‘Sweep and Cancel,’’ or a
the ATs maintain the physical security converted into Day Orders. combination thereof.
of the equipment for accessing the (5) Any limit orders entered with a (A) Any unfilled portion of a Sweep
facilities of the Exchange to prevent the ‘‘Good ’til Extended Hours’’ (GTX) or Order designated ‘‘Sweep and Post’’
improper use or access to the systems, similar time-in-force term will be following the market sweep described in
including unauthorized entry of automatically converted into Day + subsection (i) above will be converted
information into the systems. Orders. into a Post Only Order.
(c) Other Types of Orders and Order (B) Any unfilled portion of a Sweep
Rule 11.11. Orders and Modifiers Modifiers. Order designated ‘‘Sweep and Cancel’’
Users may enter into the System the (1) ITS Order. An order entered into after the completion of the market
types of orders listed in this Rule 11.11, the System via the Intermarket Trading sweep described in subsection (i) above
subject to the limitations set forth in this System (‘‘ITS’’) as described in Chapter will be cancelled.
Rule or elsewhere in these Rules. XIV of these Rules. ITS Orders are (iii) A Sweep Order entered as part of
(a) General Order Types. executable in round lots only. All ITS a ‘‘Cross/Sweep’’ message pursuant to
(1) Market Order. An order to buy or Orders shall be treated as Immediate-or- Rule 11.12 shall be treated identically to
sell a stated amount of a security that Cancel (IOC). a Sweep Order designated ‘‘Sweep and
is to be executed at the best price (2) Reserve Order. A limit order with Cancel’’ except as otherwise provided in
obtainable when the order reaches the a portion of the quantity displayed Rule 11.12.
Exchange. A market order that is (‘‘display quantity’’) and with a reserve (iv) Any order converted from a
designated as ‘‘NSX Only’’ will be portion of the quantity (‘‘reserve Protected Sweep Order or Full Sweep
cancelled if when reaching the quantity’’) that is not displayed. Order for routing to other trading
Exchange, it cannot be executed in (3) Odd Lot Order. An order to buy or centers or for execution against the NSX
accordance with Rule 11.15(a)(i) on the sell an odd lot. Odd Lot Orders are only Book shall be marked as an intermarket
System. Market orders that are not eligible to be protected quotations if sweep order or ‘‘ISO’’.
designated as ‘‘NSX Only’’ and that aggregated to form a round lot. (8) Incoming Intermarket Sweep
cannot be executed in accordance with (4) Mixed Lot Order. An order to buy Order. The System will accept incoming
Rule 11.15(a)(i) on the System when or sell a mixed lot. Odd lot portions of intermarket sweep orders (as such term
reaching the Exchange will be eligible Mixed Lot Orders are only eligible to be is defined in Regulation NMS) from
for routing away pursuant to Rule 11.15. protected quotations if aggregated to other trading centers. Such orders must
(2) Limit Order. An order to buy or sell form a round lot. be marked ‘‘ISO’’ in order to be eligible
a stated amount of a security at a (5) Post Only Order. A limit order that for treatment as an intermarket sweep
specified price or better. A ‘‘marketable’’ is to be posted on the Exchange and not order. Such orders, if appropriately
limit order is a limit order to buy (sell) routed away to another trading center. marked, will be considered immediate-
at or above (below) the Protected NBBO A Post Only Order will be rejected or-cancel (IOC) and will be executed
offer (bid) for the security. without execution if it is immediately without regard to protected quotations
(b) Time-in-Force. Limit orders must marketable when entered. at away markets consistent with
have one of the following time-in-force (6) NSX Only Order. An order that is Regulation NMS.
terms. to be executed on the Exchange (9) Destination Specific Order. A
(1) Immediate-or-Cancel (‘‘IOC’’) pursuant to Rule 11.15(a) or cancelled, market or limit order that instructs the
Order. A limit order that is to be without routing away to another trading System to route the order to a specified
executed in whole or in part as soon as center. away trading center, after exposing the
such order is received, and the portion (7) Sweep Order. A limit order that order to the NSX Book. Users can access
not so executed is to be treated as instructs the System to ‘‘sweep’’ the markets offering bids and offers other
cancelled. An order designated as IOC market. than protected quotations (i.e., manual
is not eligible for routing away pursuant (i) Sweep Orders may be designated quotations) by entering a Destination
to Rule 11.15. as ‘‘Protected Sweep,’’ ‘‘Full Sweep,’’ or Specific Order. A Destination Specific
(2) Day Order. A limit order to buy or ‘‘Destination Sweep.’’ Sweep Orders not Order must have an order type and a
sell which, if not executed, expires at carrying any such designation shall be time-in-force term permitted by this
the closing of the regular trading session treated as Protected Sweep Orders. Rule 11.11.
for such security on its Listing (A) A Protected Sweep Order will be (d) Cancel/Replace Messages. A User
Exchange. Any Day Order entered into converted into one or more limit orders may, by appropriate entry in the
the System before the opening of with sizes equal to the sizes of protected System, cancel or replace an existing
order entered by the User, subject to the (1) The Cross is for at least 5,000 User shall include a unique account
following limitations. shares and has an aggregate value of at number or other identifier that enables
(i) Orders may only be cancelled or least $100,000; the User to identify the User’s customer
replaced if the order has a time-in-force (2) Neither side of the Cross is for the on whose behalf the order is being
term other than IOC and if the order has account of the User entering the Cross; entered.
not yet been executed. and (b) The System offers two modes of
(ii) If an order has been routed to (3) The size of the Cross is greater order interaction selected by Users:
another trading center, the order will be than the size of the interest at each side (1) If automatic execution is selected,
placed in a ‘‘Cancel Pending’’ state until of the Top of Book; the System shall match and execute
the routing process is completed. (4) Following the compliance date for like-priced orders on an order by order
Executions that are completed when the Rule 611 of Regulation NMS, the price basis only at the specific instruction of
order is in the ‘‘Cancel Pending’’ state of the Cross is equal to or better than the Users.
will be processed normally. Protected NBBO. (2) If order delivery and automated
(iii) Only the price and quantity terms (e) If either side of a Cross is for the response is selected, the System will
of the order may be changed by a account of the User entering the Cross deliver contra-side orders against
Replace Message. If a User desires to (a ‘‘Proprietary Cross’’), the User must displayed orders on an order by order
change any other terms of an existing comply with Exchange Rule 12.6 (the basis only at the specific instruction of
order the existing order must be Customer Priority Rule). Without Users. To be eligible for order delivery
cancelled and a new order must be limiting the foregoing, no User shall service, Users must demonstrate to
entered. enter a Proprietary Cross if the User is Exchange examiners that the User’s
(iv) Notwithstanding anything to the holding a customer order in the security system can automatically process the
contrary in these Exchange Rules, no unless the price of the Proprietary Cross inbound order and respond
cancellation or replacement of an order improves the price that could have been appropriately within 1⁄2 of a second. If
will be effective until the User has received by the customer order by at no response to an inbound order is
received written confirmation of the least $0.01. received within 1⁄2 of a second, the
cancellation or replacement from the (f) Cross/Sweep. Users may enter a User’s displayed order will be cancelled.
Exchange. ‘‘Cross/Sweep’’ message into the System
involving both a Sweep Order and a Rule 11.14. Priority of Orders
Rule 11.12. Cross Message Cross. (a) Ranking. Orders of Users shall be
(a) Subject to the restrictions of this (1) Upon receipt of a Cross/Sweep ranked and maintained in the NSX
Rule, Users may enter a cross message message, the System will enter a Book based on the following priority:
(a ‘‘Cross’’) instructing the System to Protected Sweep Order for the User’s (1) The highest-priced order to buy (or
match for execution the identified buy- account in an amount necessary to lowest-priced order to sell) shall have
side of the Cross with the identified sell- execute against all protected quotations priority over all other orders to buy (or
side of the Cross at a specified price (the that, if not swept, would prohibit the orders to sell) in all cases.
‘‘cross price’’). Cross from being executed by the (2) Where orders to buy (or sell) are
(b) Except as provided in paragraphs System pursuant to paragraph (b) made at the same price, the order
(c), (d) or (f) below, no Cross will be above. The Cross will be executed on the clearly established as the first entered
executed by the System, unless: System simultaneously with the Sweep into the System at such particular price
(1) The buy-side of the Cross is at a Order, unless the Protected Sweep Order shall have precedence at that price, up
price less (by at least $0.01 per share) would be for an amount of shares in to the number of shares of stock
than the lowest displayed order to sell excess of the size of the Cross, in which specified in the order.
in the NSX Book, and (following the case both the Protected Sweep Order (3) In the event that less than the full
compliance date for Rule 611 of and the Cross shall be cancelled without size of an order is executed, the
Regulation NMS) is at a price equal to execution. unexecuted size of the order shall retain
or less than the Protected NBBO offer; (2) No User shall enter a Cross/Sweep priority at the same limit price in
and if either side of the Cross is for the accordance with paragraphs (1) and (2)
(2) The sell-side of the Cross is at a account of a customer, unless the User above.
price greater (by at least $0.01 per share) fully discloses to such customer all of (4) The displayed quantity of a
than the highest displayed order to buy the material facts relating to the Sweep Reserve Order shall have time priority
in the NSX Book, and (following the Order, including price(s) of the Sweep as of the time of display. If the
compliance date for Rule 611 of Order and the fact that the Sweep Order displayed quantity of the Reserve Order
Regulation NMS) is at a price equal to is for the account of the User. is decremented such that 99 shares or
or greater than the Protected NBBO bid. fewer would be displayed, the displayed
(c) Midpoint Cross. A Cross that is Rule 11.13. Proprietary and Agency portion of the Reserve Order shall be
priced at the midpoint of the Protected Orders; Modes of Order Interaction refreshed for (i) the original displayed
NBBO (or, prior to the compliance date (a) Except as otherwise provided in quantity, or (ii) the entire reserve
for Rule 611 of Regulation NMS, at the these Rules, Users may enter proprietary quantity, if the remaining reserve
midpoint of the best bid and offer on the orders and agency orders for the quantity is smaller than the original
Exchange) (a ‘‘Midpoint Cross’’) may be account of a customer. Proprietary displayed quantity. After the refresh, the
executed on the System if it improves orders accepted by the System from displayed portion of the Reserve Order
each side of the Top of Book by at least Users are subject to the same ranking shall have time priority as of the time
half the minimum increment permitted and execution processes as agency of the refresh. The reserve quantity of a
by Rule 11.3(a). orders. A User that enters a proprietary Reserve Order shall have no time
(d) Clean Cross. A Cross meeting the order into the System shall mark the priority until displayed. If all displayed
following requirements (a ‘‘Clean order with the appropriate designator to orders and displayed portions of
Cross’’) may be executed on the System identify the order as proprietary. All Reserve Orders at a given price are
at a price equal to or better than each agency orders shall be designated as executed, and following such execution
side of the Top of Book: such and with each agency order, the any marketable contra-side orders
remain outstanding, then such contra- for execution against the applicable (i) An order that is routed away may
side orders shall be executed against the protected quotation at the Protected be executed in whole or in part subject
refreshed displayed portions of Reserve NBBO. No orders routed away pursuant to the applicable trading rules of the
Orders at such price based on the time to this subsection (ii) shall be marked relevant trading center. While an order
priority as determined by this paragraph ISO. remains outside the System, it shall
(4). (iii) Following steps (i) and (ii) above, have no time standing, relative to other
(b) Dissemination. The best-ranked unless the terms of the order direct orders received from Users at the same
order(s) to buy and the best-ranked otherwise, any unfilled portion of the price which may be executed against the
order(s) to sell in the NSX Book and the order originally entered into the System NSX Book. Requests from Users to
aggregate displayed size of such orders shall be ranked in the NSX Book in cancel their orders while the order is
associated with such prices shall be accordance with the terms of such order routed away to another trading center
collected and made available to under Rule 11.14 and such order shall and remains outside the System shall be
quotation vendors for dissemination be eligible for execution under this Rule processed, subject to the applicable
pursuant to the requirements of Rule 11.15. trading rules of the relevant trading
602 of Regulation NMS. (b) Sweep Orders. center.
(i) Protected Sweep Orders. A (ii) Where an order or portion of an
Rule 11.15. Order Execution
Protected Sweep Order will be matched order is routed away and is not executed
Subject to the restrictions on short either in whole or in part at the other
for execution in the NSX Book in
sales under these Exchange Rules or the trading center (i.e., all attempts at the
accordance with paragraph (a)(i), and
Act and the rules and regulations fill are declined or timed-out), the order
will simultaneously be converted into
thereunder, orders shall be matched for shall be ranked in the NSX Book in
one or more additional limit orders, as
execution by following this Rule. For accordance with the terms of such order
necessary, with sizes equal to the size of
any execution to occur during Regular under Rule 11.14 and such order shall
each protected quotation that is
Trading Hours, however, the price must be eligible for execution under this Rule
superior (or in the case of a Protected
be equal to or better than the Protected 11.15, unless the terms of the order
Sweep Order designated ‘‘Sweep and
NBBO, unless the order is marked ISO provide otherwise.
Post’’, superior or equal) to the limit
or unless the execution falls within (d) Display of Automated Quotations.
price of the Protected Sweep Order.
another exception set forth in Rule The System will be operated as an
Each converted limit order will be
611(b) of Regulation NMS. ‘‘automated market center’’ within the
(a) Orders Other than Sweep Orders. routed to the applicable trading center
meaning of Regulation NMS, and in
(i) Execution against NSX Book. An for execution.
furtherance thereof, will display
incoming order (other than a Sweep (ii) Full Sweep Orders. A Full Sweep
‘‘automated quotations’’ within the
Order) shall first attempt to be matched Order will be matched for execution in
meaning of Regulation NMS at all times
for execution against orders in the NSX the NSX Book in accordance with
except in the event that a systems
Book. An incoming order to buy (other paragraph (a)(i), and will
malfunction renders the System
than a Sweep Order) will be simultaneously be converted into one or
incapable of displaying automated
automatically executed to the extent more additional limit orders, as
quotations. The Exchange shall
that it is priced at an amount that necessary, with sizes equal to the size of
communicate to ETP Holders its
equals or exceeds any order to sell in each quotation available at an away
procedures concerning a change from
the NSX Book. Such order to buy shall trading center that (A) is the best bid or
automated to manual quotations.
be executed at the price(s) of the lowest offer of a national securities exchange
order(s) to sell having priority in the or association, and (B) is superior (or, in Rule 11.16. Trade Execution and
NSX Book. An incoming order to sell the case of a Full Sweep Order Reporting
(other than a Sweep Order) will be designated ‘‘Sweep and Post’’, superior Executions occurring as a result of
automatically executed to the extent or equal) to the limit price of the Full orders matched against the NSX Book
that it is priced at an amount that Sweep Order. Each converted limit shall be reported by the Exchange to an
equals or is less than any other order to order will be routed to the applicable appropriate consolidated transaction
buy in the NSX Book. Such order to sell trading center for execution. reporting system to the extent required
shall be executed at the price(s) of the (iii) Destination Sweep Orders. A by the Act and the rules and regulations
highest order(s) to buy having priority in Destination Sweep Order will be thereunder. Executions occurring as a
the NSX Book. matched for execution in the NSX Book result of orders routed away from the
(ii) Routing to Away Trading Centers. in accordance with paragraph (a)(i), and System shall be reported to an
Unless the terms of the order direct if it cannot be matched for execution in appropriate consolidated transaction
otherwise, if an order (other than a accordance with paragraph (a)(i), will reporting system by the relevant
Sweep Order) has not been executed in be routed to the specified away trading reporting trading center. The Exchange
its entirety pursuant to paragraph (a)(i) center for execution. shall promptly notify Users of all
of this Rule, the order shall be eligible (iv) Any order converted from a executions of their orders as soon as
for routing away as follows: Protected Sweep Order or Full Sweep such executions take place.
(A) The order will be converted into Order for routing to other trading
one or more limit orders, as necessary, centers or for execution against the NSX Rule 11.17. Clearance and Settlement
to be matched for execution against Book shall be marked as an intermarket (a) Each ETP Holder must either (1) be
each protected quotation at the sweep order or ‘‘ISO’’. a member of a Qualified Clearing
Protected NBBO available at away (v) Following the steps described Agency, or (2) clear transactions
trading centers. Each such converted above, any unfilled portion of the Sweep executed on the Exchange through
limit order shall be priced at the price Order will either be cancelled or ranked another ETP Holder that is a member of
of the protected quotation that it is to in the NSX Book in accordance with the a Qualified Clearing Agency. Each
be matched for execution against. terms of the Sweep Order. Sponsored Participant must be a
(B) Each converted limit order will be (c) Special Rules for Orders Routed to member of a Qualified Clearing Agency.
routed to the applicable trading center Other Trading Centers. If an ETP Holder clears transactions
through another ETP Holder that is a INCLUDING, BUT NOT LIMITED TO, public interest. Each party to the
member of a Qualified Clearing Agency FLOOD, EXTRAORDINARY WEATHER transaction shall provide, within thirty
(‘‘clearing member’’), such clearing CONDITIONS, EARTHQUAKE OR (30) minutes of the request for review,
member shall affirm to the Exchange in OTHER ACTS OF GOD, FIRE, WAR, any supporting written information as
writing, through letter of authorization, TERRORISM, INSURRECTION, RIOT, may be reasonably requested by Officer
letter of guarantee or other agreement LABOR DISPUTE, ACCIDENT, ACTION to aid resolution of the matter. Either
acceptable to the Exchange, its OF GOVERNMENT, party to the disputed trade may request
agreement to assume responsibility for COMMUNICATIONS OR POWER the supporting written information
clearing and settling any and all trades FAILURE, OR EQUIPMENT OR provided by the other party on the
executed by the ETP Holder designating SOFTWARE MALFUNCTION. matter.
it as its clearing firm. The rules of any (B) EACH ETP HOLDER EXPRESSLY (c) Review Procedures.
such clearing agency shall govern with AGREES, IN CONSIDERATION OF THE (1) Determination by Officer. Unless
respect to the clearance and settlement ISSUANCE OF THE ETP, TO RELEASE both parties (or party, in the case of a
of any transactions executed by the ETP AND DISCHARGE THE EXCHANGE cross) to the disputed transaction agree
Holder on the Exchange. AND ALL EXCHANGE RELATED to withdraw the initial request for
(b) Each transaction executed within PERSONS OF AND FROM ALL CLAIMS review, the transaction under dispute
the System shall be automatically AND DAMAGES ARISING FROM THEIR shall be reviewed, and a determination
processed for clearance and settlement ACCEPTANCE AND USE OF THE shall be rendered by the Officer. If the
on a locked-in basis. FACILITIES OF THE EXCHANGE Officer determines that the transaction
(c) Except as required by any (INCLUDING, WITHOUT LIMITATION, is not clearly erroneous, the Officer shall
Qualified Clearing Agency, the THE SYSTEM). decline to take any action in connection
Exchange will reveal the identity of an (C) NEITHER THE EXCHANGE NOR with the completed trade. In the event
ETP Holder or ETP Holder’s clearing ANY EXCHANGE RELATED PERSON that the Officer determines that the
firm in the following circumstances: MAKES ANY EXPRESS OR IMPLIED transaction in dispute is clearly
(1) for regulatory purposes or to WARRANTIES OR CONDITIONS TO
erroneous, the Officer shall declare the
comply with an order of a court or USERS AS TO RESULTS THAT ANY
transaction null and void or modify one
arbitrator; or PERSON OR PARTY MAY OBTAIN
or more of the terms of the transaction
(2) when a Qualified Clearing Agency FROM THE SYSTEM FOR TRADING OR
to achieve an equitable rectification of
ceases to act for an ETP Holder or the FOR ANY OTHER PURPOSE, AND ALL
the error that would place the parties in
ETP Holder’s clearing firm, and WARRANTIES OF MERCHANTABILITY
the same position, or as close as
determines not to guarantee the OR FITNESS FOR A PARTICULAR
possible to the same position that they
settlement of the ETP Holder’s trades. PURPOSE OR USE, TITLE, AND NON-
would have been in, had the error not
INFRINGEMENT WITH RESPECT TO
11.18. LIMITATION OF LIABILITY occurred. The parties shall be promptly
THE SYSTEM ARE HEREBY
(A) NEITHER THE EXCHANGE NOR DISCLAIMED. notified of the determination.
ITS AGENTS, EMPLOYEES, (2) Appeal to CEE Panel. If a party
CONTRACTORS, OFFICERS, Rule 11.19. Clearly Erroneous affected by a determination made under
DIRECTORS, COMMITTEE MEMBERS Executions this Rule so requests within the time
OR AFFILIATES (‘‘EXCHANGE (a) Definition. For purposes of this permitted below, the Clearly Erroneous
RELATED PERSONS’’) SHALL BE Rule, the terms of a transaction Execution Panel (‘‘CEE Panel’’) will
LIABLE TO ANY USER OR ETP executed on the Exchange are ‘‘clearly review decisions made by the Officer
HOLDER, OR SUCCESSORS, erroneous’’ when there is an obvious under this Rule, including whether a
REPRESENTATIVES OR CUSTOMERS error in any term, such as price, number clearly erroneous execution occurred
THEREOF, OR ANY PERSONS of shares or other unit of trading, or and whether the correct adjustment was
ASSOCIATED THEREWITH, FOR ANY identification of the security. A made.
LOSS, DAMAGES, CLAIM OR transaction made in clearly erroneous (A) The CEE Panel will be comprised
EXPENSE: error and cancelled by both parties may of the Exchange’s Chief Regulatory
(1) GROWING OUT OF THE USE OR be removed, if the parties do not object, Officer (‘‘CRO’’), or a designee of the
ENJOYMENT OF ANY FACILITY OF subject to the approval of the Exchange. CRO, and representatives from two (2)
THE EXCHANGE, INCLUDING, (b) Request for Exchange Review. An ETP Holders.
WITHOUT LIMITATION, THE SYSTEM; ETP Holder that receives an execution (B) The Exchange shall designate the
OR on an order that was submitted ETP Holder representatives to be called
(2) ARISING FROM OR OCCASIONED erroneously to the Exchange for its own upon to serve on the CEE Panel as
BY ANY INACCURACY, ERROR OR or customer account may request that needed. In no case shall a CEE Panel
DELAY IN, OR OMISSION OF OR the Exchange review the transaction include a person related to a party to
FROM THE COLLECTION, under this Rule. Such request for review the trade in question. To the extent
CALCULATION, COMPILATION, shall be made via telephone, facsimile reasonably possible, the Exchange shall
MAINTENANCE, REPORTING OR or e-mail and submitted within fifteen call upon the designated representatives
DISSEMINATION OF ANY (15) minutes of the trade in question. to participate on a CEE Panel on an
INFORMATION DERIVED FROM THE Upon receipt, the counterparty to the equally frequent basis.
SYSTEM OR ANY OTHER FACILITY trade, if any, shall be notified by the (C) A request for review on appeal
OF THE EXCHANGE, RESULTING Exchange as soon as practicable. must be made via facsimile or e-mail
EITHER FROM ANY ACT OR Thereafter, an Officer of the Exchange within thirty (30) minutes after the party
OMISSION BY THE EXCHANGE OR or such other designee of the Exchange making the appeal is given notification
ANY EXCHANGE RELATED PERSON, (‘‘Officer’’) shall review the transaction of the initial determination being
OR FROM ANY ACT CONDITION OR under dispute and determine whether it appealed. The CEE Panel shall review
CAUSE BEYOND THE REASONABLE is clearly erroneous, with a view toward the facts and render a decision within
CONTROL OF THE EXCHANGE OR maintaining a fair and orderly market the time frame prescribed by the
ANY EXCHANGE RELATED PERSON, and the protection of investors and the Exchange.
(D) The CEE Panel may overturn or (b) Trading in stocks will halt on the limitation of the Exchange’s ability to
modify an action taken by the Officer Exchange and will not re-open for the adopt additional Rules, interpretations
under this Rule. All determinations by time periods described in this paragraph or policies relating to short sales.
the CEE Panel shall constitute final (b) if the Dow Jones Industrial Average
Rule 11.22. Locking or Crossing
action by the Exchange on the matter at reaches Level 2 below its closing value Quotations in NMS Stocks
issue. on the previous trading day:
(d) Abuse of Process. An abuse of the (1) before 12:00 noon Central Time, (a) Definitions. For purposes of this
process described in subsections (c) and for two hours; Rule, the following definitions shall
(d) above may subject the abusing User (2) at or after 12:00 noon but before apply:
to disciplinary action under Chapter 1:00 p.m. Central Time, for one hour; (1) The terms automated quotation,
VIII. (3) at or after 1:00 p.m. Central Time, effective national market system plan,
(e) System Disruption and for the remainder of the day. intermarket sweep order, manual
Malfunctions. In the event of any (c) If the Dow Jones Industrial Average quotation, NMS stock, protected
disruption or a malfunction in the use reaches Level 3 below its closing value quotation, regular trading hours, and
or operation of any electronic on the previous trading day, trading in trading center shall have the meanings
communications and trading facilities stocks will halt on the Exchange and set forth in Rule 600(b) of Regulation
of the Exchange, or extraordinary will not reopen for the remainder of the NMS.
market conditions or other day. (2) The term crossing quotation shall
circumstances in which the nullification (d) On the occurrence of any trading mean the display of a bid for an NMS
or modification of transactions may be halt pursuant to this Rule, all stock during regular trading hours at a
necessary for the maintenance of a fair outstanding orders in the System will be price that is higher than the price of an
and orderly market or the protection of cancelled. offer for such NMS stock previously
investors and the public interest exist, Commentary: disseminated pursuant to an effective
the Officer, on his or her own motion, .01 Levels 1, 2 and 3 will be national market system plan, or the
may review such transactions and calculated at the beginning of each display of an offer for an NMS stock
declare such transactions arising out of calendar quarter, using the average during regular trading hours at a price
the use or operation of such facilities closing value of the Dow Jones that is lower than the price of a bid for
during such period null and void or Industrial Average for the month prior such NMS stock previously
modify the terms of these transactions if to the beginning of the quarter. Level 1 disseminated pursuant to an effective
the Officer determines that the will be 10% of such average closing national market system plan.
transaction(s) are clearly erroneous, or value calculation; Level 2 will be 20% (3) The term locking quotation shall
that such actions are necessary for the of such average closing value mean the display of a bid for an NMS
maintenance of a fair and orderly calculation; Level 3 will be 30% of such stock during regular trading hours at a
market or for the protection of investors average closing value calculation. Each price that equals the price of an offer for
and the public interest. Any such action Level will be rounded to the nearest fifty such NMS stock previously
of the Officer pursuant to this points. The values of Levels 1, 2 and 3 disseminated pursuant to an effective
subsection (e) shall be taken as will remain in effect until the next national market system plan, or the
promptly as practicable following calculation. display of an offer for an NMS stock
detection of the erroneous transaction. .02 The restrictions in this Rule will during regular trading hours at a price
Each ETP Holder involved in the apply whenever the Dow Jones that equals the price of a bid for such
transaction shall be notified as soon as Industrial Average reaches the trigger NMS stock previously disseminated
practicable, and the ETP Holder values notwithstanding the fact that at pursuant to an effective national market
aggrieved by the action may appeal any given time, the calculation of the system plan.
such action in accordance with the value of the average may be based on (b) Prohibition. Except for quotations
provisions of subsection (c)(2). the prices of less than all of the stocks that fall within the provisions of
included in the average. paragraph (d) of this Rule, Users shall
Rule 11.20. Trading Halts Due to .03 The reopening of trading reasonably avoid displaying, and shall
Extraordinary Market Volatility following a trading halt under this Rule not engage in a pattern or practice of
(a) Trading in stocks will halt on the will be conducted pursuant to displaying, any quotations that lock or
Exchange and will not reopen for the procedures adopted by the Exchange cross a protected quotation, and any
time periods described in this paragraph and communicated by notice to its ETP manual quotations that lock or cross a
(a) if the Dow Jones Industrial Average Holders. quotation previously disseminated
reaches Level 1 below its closing value .04 Nothing in this Rule should be pursuant to an effective national market
on the previous trading day: construed to limit the ability of the system plan.
(1) before 1:00 p.m. Central Time, for Exchange to otherwise halt or suspend (c) Manual quotations. If a User
one hour; the trading in any stock or stocks traded displays a manual quotation that locks
(2) at or after 1:00 p.m. but before 1:30 on the Exchange pursuant to any other or crosses a quotation previously
p.m. Central Time, for 30 minutes. Exchange Rule or policy. disseminated pursuant to an effective
If the Dow Jones Industrial Average national market system plan, such User
reaches Level 1 below its closing value Rule 11.21. Short Sales
shall promptly either withdraw the
on the previous trading day at or after All short sale orders shall be manual quotation or route an
1:30 p.m. Central Time, trading will identified as either short sale or short intermarket sweep order to execute
continue through the facilities of the sale exempt when entered into the against the full displayed size of the
Exchange until the close, unless the System. Any marketable order entered locked or crossed quotation.
Dow Jones Industrial Average reaches in the System that, if matched for (d) Exceptions.
Level 2 below its closing value on the execution, would violate the short sale (1) The locking or crossing quotation
previous trading day, at which time provisions of the Act or the rules and was displayed at a time when the
trading will be halted for the remainder regulations thereunder shall be trading center displaying the locked or
of the day. cancelled. The foregoing shall not be in crossed quotation was experiencing a
failure, material delay, or malfunction Holder must also have supervisory price of the customer limit order (not
of its systems or equipment. systems in place that produce records the quoted price) held by such
(2) The locking or crossing quotation that enable the ETP Holder and the [Designated Dealer] ETP Holder.
was displayed at a time when a Exchange to accurately and readily * * * * *
protected bid was higher than a reconstruct, in a time-sequenced
protected offer in the NMS stock. manner, all orders related to each CHAPTER XIV. Intermarket Trading
(3) The locking or crossing quotation riskless principal transaction. System Plan
was an automated quotation, and the * * * * * * * * * *
User displaying such automated
quotation simultaneously routed an CHAPTER XII. Trading Practice Rules Rule 14.9. ITS ‘‘Trade-Throughs’’ and
intermarket sweep order to execute ‘‘Locked Markets’’
* * * * *
against the full displayed size of any (a)–(e) No change.
locked or crossed protected quotation. Rule 12.6. Customer Priority (f) This Rule 14.9 shall cease to be
(4) The locking or crossing quotation (a)–(c) No change. operational on the compliance date for
was a manual quotation that locked or (d) The provisions of paragraphs (a) the provisions of Regulation NMS
crossed another manual quotation, and and (b) of this Rule also shall not apply relating to trade-throughs and locked
the User displaying the locking or if an ETP Holder engages in trading markets.
crossing manual quotation activity to facilitate the execution, on a * * * * *
simultaneously routed an intermarket riskless principal basis, of another order
sweep order to execute against the full from its customer (whether its own CHAPTER XV. Listed Securities and
displayed size of the locked or crossed customer or the customer of another Other Exchange Products
manual quotation. member) (the ‘‘facilitated order’’), * * * * *
Rule 11.23. Riskless Principal provided that the requirements of Rule
15.10. Portfolio Depositary Receipts
Transactions 11.23 are satisfied. Any transaction
handled by an ETP Holder on other (1) Applicability. This rule is
(a) A ‘‘riskless principal transaction’’ than an agency basis that does not applicable only to Portfolio Depositary
is defined as two offsetting principal satisfy the requirements of Exchange Receipts. Except to the extent
transaction legs in which an ETP Rule 11.23 remains a transaction that, inconsistent with this rule, or unless the
Holder, (i) after having received an unless otherwise exempt, is subject to context otherwise requires, the
order to buy a security that it holds for the provisions of paragraphs (a) and (b) provisions of the By-Laws and all other
execution on the Exchange, purchases of this Rule. This exemption applies to rules and policies of the Board shall be
the security as principal at the same both offsetting transaction legs of a applicable to the trading on the
price, exclusive of markups, riskless principal transaction but only to Exchange of such securities. Portfolio
markdowns, commissions and other the extent of the actual number of Depositary Receipts are included within
fees, to satisfy all or a portion of the shares that are required to satisfy the the definition of ‘‘security’’ or
order to buy or (ii) after having received facilitated order. ‘‘securities’’ as such terms are used in
an order to sell a security that it holds the By-Laws and Rules of the Exchange.
for execution on the Exchange, sells the Interpretations and Policies (2) Definitions. The following terms as
security as principal at the same price, .01 If [a Designated Dealer] an ETP used in the Rules shall, unless the
exclusive of markups, markdowns, Holder holds for execution on the context otherwise requires, have the
commissions and other fees, to satisfy Exchange a customer buy order and a meanings herein specified:
all or a portion of the order to sell. customer sell order that can be crossed, (a) Portfolio Depositary Receipt. The
(b) A last sale report for only the the [Designated Dealer] ETP Holder term ‘‘Portfolio Depositary Receipt’’
initial offsetting transaction leg of a shall cross them without means a security (i) that is based on a
riskless principal transaction shall be interpositioning itself as a dealer. unit investment trust (‘‘Trust’’) which
submitted to the respective consolidated .02 For a pilot period lasting through holds the securities which comprise an
tape in accordance with the rules and June 30, 2006: index or portfolio underlying a series of
procedures of the market where that (a) [A Designated Dealer] An ETP Portfolio Depositary Receipts; (ii) that is
transaction leg occurred. A last sale Holder shall be deemed to have violated issued by the Trust in a specified
report for the second offsetting Rule 12.6 if, while holding a customer aggregate minimum number in return
transaction leg of a riskless principal limit order (as rounded to a penny for a ‘‘Portfolio Deposit’’ consisting of
transaction shall not be submitted by increment) representing the NBBO, the specified numbers of shares of stock
the Exchange to the respective [Designated Dealer] ETP Holder, for his plus a cash amount; (iii) that, when
consolidated tape provided that the own account, trades with an incoming aggregated in the same specified
second offsetting transaction leg is market or marketable limit order at a minimum number, may be redeemed
submitted to the Exchange for execution price which is less than one penny from the Trust which will pay to the
and designated with a riskless principal better than the price of such customer redeeming holder the stock and cash
modifier by the ETP Holder. limit order (not the quoted price) held then comprising the ‘‘Portfolio Deposit’;
(c) An ETP Holder must have written by such [Designated Dealer] ETP Holder. and (iv) that pays holders a periodic
policies and procedures to assure that (b) [A Designated Dealer] An ETP cash payment corresponding to the
its riskless principal transactions Holder shall be deemed to have violated regular cash dividends or distributions
comply with this Rule. At a minimum Rule 12.6 if, while holding a customer declared with respect to the component
these policies and procedures must limit order (as rounded to a penny securities of the stock index or portfolio
require that the customer order be increment) at a price outside the NBBO, of securities underlying the Portfolio
received prior to the offsetting the [Designated Dealer] ETP Holder, for Depository Receipts, less certain
transactions, and that the second his own account, trades with an expenses and other charges as set forth
offsetting transaction leg be executed incoming market or marketable limit in the Trust prospectus.
within 60 seconds of the initial order at a price which is less than the (b) Reporting Authority. The term
offsetting transaction leg. An ETP nearest penny increment to the actual ‘‘Reporting Authority’’ in respect of a
particular series of Portfolio Depositary for the particular series of Portfolio which may provide for termination if
Receipts means the Exchange, an Depositary Receipts. the value of securities in the Trust falls
institution (including the Trustee for a (4) Designation of an Index or below a specified amount.
series of Portfolio Depositary Receipts), Portfolio. The trading of Portfolio (c) Term—The stated term of the
or a reporting service designated by the Depositary Receipts based on one or Trust shall be stated in the Trust
Exchange, or by the exchange that lists more stock indices or securities Prospectus. However, a Trust may be
a particular series of Portfolio portfolios, whether by listing or terminated under such earlier
Depository Receipts (if the Exchange is pursuant to unlisted trading privileges, circumstances as may be specified in
trading such series pursuant to unlisted shall be considered on a case by case the Trust prospectus.
trading privileges) as the official source basis. The Portfolio Depositary Receipts (d) Trustee—The trustee must be a
for calculating and reporting based on each particular stock index or trust company or banking institution
information relating to such series, portfolio shall be designated as a having substantial capital and surplus
including, but not limited to, any separate series and shall be identified and the experience and facilities for
current index or portfolio value; the by a unique symbol. The stocks that are handling corporate trust business. In
current value of the portfolio of included in an index or portfolio on cases where, for any reason, an
securities required to be deposited to the which Portfolio Depositary Receipts are individual has been appointed as
Trust in connection with issuance of based shall be selected by the Exchange trustee, a qualified trust company or
Portfolio Depositary Receipts; the or by such other person as shall have a banking institution must be appointed
amount of any dividend equivalent proprietary interest in and authorized as co-trustee.
payment or cash distribution to holders use of such index or portfolio, and may (e) Voting—Voting rights shall be as
of Portfolio Depositary Receipts, net be revised from time to time as may be set forth in the Trust prospectus. The
asset value, or other information deemed necessary or appropriate to Trustee of a Trust may have the right to
relating to the creation, redemption or maintain the quality and character of vote all of the voting securities of such
trading of Portfolio Depositary receipts. the index or portfolio. Trust.
(3) ETP Holders shall provide to all (5) Initial and Continued Listing and/ (6) Limitation of Exchange Liability.
purchasers of a series of Portfolio or Trading. A Trust upon which a series Neither the Exchange, the Reporting
Depositary Receipts a written of Portfolio Depositary Receipts is based Authority nor any agent of the Exchange
description of the terms and will be traded on the Exchange, whether shall have any liability for damages,
characteristics of such securities, in a by listing or pursuant to unlisted trading claims, losses or expenses caused by
form approved by the Exchange, not privileges, subject to application of the any errors, omissions, or delays in
later than the time a confirmation of the following criteria: calculating or disseminating any current
first transaction in such a series is (a) Commencement of Trading—For index or portfolio value, the current
delivered to such purchaser. In each Trust, the Exchange will establish value of the portfolio of securities
addition, ETP Holders shall include a minimum number of Portfolio required to be deposited to the Trust;
such a written description with any Depositary Receipts required to be the amount of any dividend equivalent
sales material relating to a series of outstanding at the time of payment or cash distribution to holders
Portfolio Depositary Receipts that is commencement of trading on the of Portfolio Depositary Receipts; net
provided to customers or the public. Exchange. asset value; or other information
Any other written materials provided by (b) Continued Trading—Following the relating to the creation redemption or
an ETP Holder to customers or to the initial twelve month period following trading of Portfolio Depositary Receipts,
public making specific reference to a formation of a Trust and resulting from any negligent act or
series of Portfolio Depositary Receipts as commencement of trading on the omission by the Exchange, or the
an investment vehicle must include a Exchange, the Exchange will consider Reporting Authority, or any agent of the
statement in substantially the following the suspension of trading in, removal Exchange or any act, condition or cause
form: ‘‘A circular describing the terms from listing of, or termination of beyond the reasonable control of the
and characteristics of [the series of unlisted trading privileges for a Trust Exchange or its agent, or the Reporting
Portfolio Depositary Receipts] is upon which a series of Portfolio Authority, including, but not limited to,
available from your broker. It is Depositary Receipts is based under any an act of God; fire; flood; extraordinary
recommended that you obtain and of the following circumstances: (i) If the weather conditions; war; insurrection;
review such circular before purchasing Trust has more than 60 days remaining riot; strike; accident; action of
[the series of Portfolio Depositary until termination and there are fewer government; communications or power
Receipts]. In addition, upon request you than 50 record and/or beneficial holders failure; equipment or software
may obtain from your broker a of Portfolio Depositary Receipts for 30 or malfunction; or any error, omission or
prospectus for [the series of Portfolio more consecutive trading days; or (ii) if delay in the reports of transactions in
Depositary Receipts].’’ An ETP Holder the value of the index or portfolio of one or more of the underlying securities.
carrying omnibus account for a non-ETP securities on which the Trust is based is The Exchange makes no warranty,
Holder broker-dealer is required to no longer calculated or available; or (iii) express or implied, as to the results to
inform such non-ETP Holder that if such other event shall occur or be obtained by any person or entity from
execution of an order to purchase a condition exists which in the opinion of the use of Portfolio Depositary Receipts
series of Portfolio Depositary Receipts the Exchange, makes future dealings on or any underlying index or data
for such omnibus account will be the Exchange inadvisable. included therein and the Exchange
deemed to constitute agreement by the Upon termination of a Trust, the makes no express or implied warranties,
non-ETP Holder to make such written Exchange requires that Portfolio and disclaims all warranties or
description available to its customers on Depositary Receipts issued in merchantability or fitness for a
the same terms as are directly connection with such Trust be removed particular purpose with respect to
applicable to ETP Holders under this from Exchange listing or have their Portfolio Depositary Receipts or any
Rule. unlisted trading privileges terminated. A underlying index or data included
Upon request of a customer, an ETP Trust may terminate in accordance with therein. This limitation of liability shall
Holder shall also provide a prospectus the provisions of the Trust prospectus, be in addition to any other limitation
contained in the Exchange’s Articles of other person as shall have a proprietary transferred only in round-lot amounts
Incorporation, By-Laws or Rules. interest in such Trust Issued Receipts. (or round-lot multiples) of 100 receipts.
(4) Initial and Continued Listing. Orders for less than a round-lot
Interpretations And Policies Trust Issued Receipts will be traded on multiple, will be executed to the extent
.01 The Exchange will trade the Exchange subject to application of of the largest round-lot multiple.
pursuant to unlisted trading privileges, the following criteria:
(a) Initial Listing—For each Trust, the Interpretations and Policies
Portfolio Depositary Receipts based on
the Standard and Poor’s Exchange’s Exchange will establish a minimum .01 The Exchange may approve a
S&P 500 Index, known as SPDRs. number of Trust Issued Receipts series of Trust Issued Receipts for
.02 The Exchange will trade, required to be outstanding at the time of trading, whether by listing or pursuant
pursuant to unlisted trading privileges, commencement of trading on the to unlisted trading privileges, pursuant
Portfolio Depositary Receipts based on Exchange. to Rule 19b–4(e) under the Act, provided
the Standard and Poor’s Exchange’s (b) Continued Listing—Following the that the following criteria are satisfied:
S&P MidCap 400 Index, known as initial twelve month period following (a) Each security underlying the Trust
MidCap SPDRs. formation of a Trust and Issued Receipt must be registered under
Standard & Poor’s’’, ‘‘S&P’’, ‘‘S&P commencement of trading on the Section 12 of the Act;
Exchange, the Exchange will consider (b) Each company whose securities
500’’, ‘‘Standard & Poor’s 500’’, and
the suspension of trading in or removal are underlying securities for the Trust
‘‘500’’ are trademarks of the McGraw-
from listing of a Trust upon which a Issued Receipt must have a minimum
Hill Companies, Inc. and have been
series of Trust Issued Receipts is based public float of at least $150 million;
licensed for use by the Exchange.
under any of the following (c) Each security underlying the Trust
15.11. Trust Issued Receipts circumstances: (i) if the Trust has more Issued Receipt must be listed on a
(1) Applicability. This rule is than 60 days remaining until national securities exchange or traded
applicable only to Trust Issued Receipts. termination and there are fewer than 50 through the facilities of NASDAQ as a
Except to the extent inconsistent with record and/or beneficial holders of reported national market system
this rule, or unless the context otherwise Trust Issued Receipts for 30 or more security;
requires, the provisions of the By-Laws consecutive trading days; (ii) if the Trust (d) Each company whose securities
and all the rules and policies of the has more than 50,000 receipts issued are underlying securities for the Trust
Board shall be applicable to the trading and outstanding; (iii) if the market value Issued Receipt must have an average
on the Exchange of such securities. of all receipts issued and outstanding is daily trading volume of at least 100,000
Trust Issued Receipts are included less than $1,000,000; or (iv) if any other shares during the preceding sixty-day
within the definition of ‘‘security’’ or event shall occur or condition exists trading period;
which, in the opinion of the Exchange, (e) Each company whose securities
‘‘securities’’ as such terms are used in
makes further dealings on the Exchange are underlying securities for the Trust
the By-Laws and Rules of the Exchange.
inadvisable. Upon termination of a Issued Receipt must have an average
The Exchange will consider for trading,
Trust, the Exchange requires that the daily dollar value of shares traded
whether by listing or pursuant to
Trust Issued Receipts issued in during the preceding sixty-day trading
unlisted trading privileges, Trust Issued
connection with such Trust be removed period of at least $1 million; and
Receipts that meet the criteria of this (f) The most heavily weighted security
Rule. from Exchange listing. A Trust may
terminate in accordance with the in the Trust Issued Receipt cannot
(2) Definitions. The following terms as initially represent more than 20% of the
provisions of the Trust prospectus,
used in the Rules shall, unless the overall value of the Trust Issued
which may provide for termination if
context otherwise requires, have the Receipt.
the value of securities in the Trust falls
following meanings herein specified:
below a specified amount. 15.12. Index Fund Shares
(a) Trust Issued Receipt. A Trust (c) Term—The stated term of the
Issued Receipt is a security (a) that is Trust shall be as stated in the Trust (1) Applicability. This Chapter is
issued by a trust (‘‘Trust’’) which holds prospectus; however, a Trust may be applicable only to Index Fund Shares.
specific securities deposited with the terminated under such earlier Except to the extent inconsistent with
Trust; (b) that when aggregated in some circumstances as may be specified in this Chapter, or unless the context
specified minimum number, may be the Trust prospectus. otherwise requires, the provisions of the
surrendered to the Trust by the (f) Trustee—The Trustee must be a By-Laws and all other rules and policies
beneficial owner to receive the trust company or banking institution of the Exchange shall be applicable to
securities; and (c) that pays beneficial having substantial capital and surplus the trading on the Exchange of Index
owners dividends and other and the experience and facilities for Fund Shares. Index Fund Shares are
distributions on the deposited securities, handling corporate trust business. In included within the definition of
if any are declared and paid to the cases where, for any reason, an ‘‘security’’ or ‘‘securities’’ as such terms
trustee by an issuer of the deposited individual has been appointed as are used in the By-Laws and Rules of the
securities. trustee, a qualified trust company or Exchange.
(3) Designation. The Exchange may banking institution must be appointed (2) Definitions. The following terms as
trade, whether by listing or pursuant to co-trustee. used in the Rules shall, unless the
unlisted trading privileges, Trust Issued (g) Voting—Voting rights shall be set context otherwise requires, have the
Receipts based on one or more forth in the Trust prospectus. meanings herein specified:
securities. The Trust Issued Receipts (5) ETP Holder Obligations. ETP (a) Index Fund Shares means a
based on particular securities shall be Holders shall provide to all purchasers security (a) that is issued by an open-
designated as a separate series and of newly issued Trust Issued Receipts a end management investment company
shall be identified by a unique symbol. prospectus for the series of Trust Issued based on a portfolio of stocks that seeks
The securities that are included in a Receipts. to provide investment results that
series of Trust Issued Receipts shall be (6) Trading Issues. Trust Issued correspond generally to the price and
selected by the Exchange or by such Receipts may be acquired, held, or yield performance of a specified foreign
or domestic stock index; (b) that is (5) Initial and Continued Listing and/ cannot exceed 25% of the weight of the
issued by such an open-end or Trading. Each series of Index Fund index or portfolio, and the five most
management investment company in a Shares will be traded on the Exchange, heavily weighted component stocks
specified aggregate minimum number in whether by listing or pursuant to cannot exceed 65% of the weight of the
return for a deposit of specified unlisted trading privileges, subject to index or portfolio; (iv) The underlying
numbers of shares of stock and/or a application of the following criteria: index or portfolio must include a
cash amount with a value equal to the (a) Commencement of Trading—For minimum of 13 stocks; and (v) All
next determined net asset value; and (c) each Series, the Exchange will establish securities in an underlying index or
that, when aggregated in the same a minimum number of Index Fund portfolio must be listed on a national
specified minimum number, may be Shares required to be outstanding at the securities exchange or The Nasdaq
redeemed at a holders request by such time of commencement of trading on the Stock Market (including the Nasdaq
open-end investment company which Exchange. SmallCap Market).
will pay to the redeeming holder the (b) Continued Trading—Following the (b) Index Methodology and
stock and/or cash with a value equal to initial twelve month period following Calculation. (i) The index underlying a
the next determined net asset value. commencement of trading on the series of Index Fund Shares will be
(b) Reporting Authority. The term Exchange of a series of Index Fund calculated based on either the market
‘‘Reporting Authority’’ in respect of a Shares, the Exchange will consider the capitalization, modified market
particular series of Index Fund Shares suspension of trading, the removal from capitalization, price, equal-dollar or
means the Exchange, a subsidiary of the listing, or termination of unlisted modified equal-dollar weighting
Exchange, or an institution or reporting trading privileges for such series under methodology; (ii) If the index is
service designated by the Exchange or any of the following circumstances: (i) if maintained by a broker-dealer, the
its subsidiary as the official source for there are fewer than 50 beneficial broker-dealer shall erect a ‘‘fire-wall’’
calculating and reporting information to holders of the series of Index Fund around the personnel who have access
such series, including, but not limited Shares for 30 or more consecutive to information concerning changes and
to, any current index or portfolio value; trading days; (ii) if the value of the adjustments to the index and the index
the current value of the portfolio of any index or portfolio of securities on which shall be calculated by a third party who
securities required to be deposited in the series of Index Fund Shares is based is not a broker-dealer; and (iii) The
connection with issuance of Index Fund is no longer calculated or available; or current index value will be
Shares; the amount of any dividend (iii) if such other event shall occur or disseminated every 15 seconds over the
equivalent payment or cash distribution condition exist which, in the opinion of Consolidated Tape Association’s
to holders of Index Fund Shares, net the Exchange, makes further dealings on Network B.
asset value, or other information the Exchange inadvisable. Upon (c) Disseminated Information. The
relating to the issuance, redemption or termination of an open-ended Reporting Authority will disseminate for
trading of Index Fund Shares. management investment company, the each series of Index Fund Shares an
Nothing in this section shall imply Exchange requires that Index Fund estimate, updated every 15 seconds, of
that an institution or reporting service Shares issued in connection with such the value of a share of each series. This
that is the source for calculating and entity be removed from Exchange may be based, for example, upon
reporting information relating to Index listing. current information regarding the
Fund Shares must be designated by the (c) Voting—Voting rights shall be as required deposit of securities and cash
Exchange, the term ‘‘Reporting set forth in the applicable open-end amount to permit creation of new shares
Authority’’ shall not refer to an management investment company of the series or upon the index value.
institution or reporting service not so prospectus. (d) Initial Shares Outstanding. A
designated. minimum of 100,000 shares of a series
(3) Disclosure. Upon request of a Interpretations and Policies
of Index Fund Shares is required to be
customer, ETP Holders shall provide to .01 The Exchange may approve a outstanding at commencement of
all purchasers of Index Fund Shares a series of Index Fund Shares for listing trading.
prospectus for the series of Index Fund pursuant to Rule 19b–4(e) under the Act (e) Minimal Fractional Trading
Shares. provided each of the following criteria is Variation. The minimum fractional
(4) Designation. The trading of Index satisfied: trading variation may vary among
Fund Shares based on one or more (a) Eligibility Criteria for Index different series of Index Fund Shares
securities, whether by listing or Components. Upon the initial listing of but will be set at 1/16th, 1/32nd, or 1/
pursuant to unlisted trading privileges, a series of Index Fund Shares each 64th of $1.00.
shall be considered on a case-by-case component of an index or portfolio (f) Hours of Trading. Trading will
basis. Each issue of Index Fund Shares underlying a series of Index Fund occur between 9:30 a.m. and either 4:00
shall be based on each particular stock Shares shall meet the following criteria p.m. or 4:15 p.m. for each series of
index or portfolio and shall be a as of the date of the initial deposit of Index Fund Shares, as specified by the
designated as a separate series and securities to the fund in connection with Exchange.
shall be identified by a unique symbol. the initial issuance of shares of such (g) Surveillance Procedures. The
The securities that are included in a fund: (i) Component stocks that in the Exchange will utilize existing
series of Index Fund Shares shall be aggregate account for at least 90% of surveillance procedures for Index Fund
selected by the Exchange or its agent, a the weight of the index or portfolio shall Shares.
wholly-owned subsidiary of the have a minimum market value of at (h) Applicability of Other Rules. The
Exchange, or by such other person least $75 million; (ii) The component provisions of the Exchange Rules and
thereof, as shall have authorized use of stocks shall have a minimum monthly By-Laws will apply to all series of Index
such index. Such index or portfolio may trading volume during each of the last Fund Shares.
be revised from time to time as may be six months of at least 250,000 shares for .02 The following paragraphs only
deemed necessary or appropriate to stocks representing at least 90% of the apply to series of Index Fund Shares
maintain the quality and character of weight of the index or portfolio; (iii) The that are the subject of an order by the
the index or portfolio. most heavily weighted component stock Securities and Exchange Commission
exempting such series from certain the places specified in Item IV below. delivery be able to process inbound
prospectus delivery requirements under The Exchange has prepared summaries, orders and respond within 1⁄2 of a
Section 24(d) of the Investment set forth in Sections A, B, and C below, second.12
Company Act of 1940. The Exchange of the most significant aspects of such With this proposed rule change, the
will inform ETP Holders regarding statements. Exchange is proposing to substantially
application of these provisions to a revise Chapter XI of its Rules (relating
A. Self-Regulatory Organization’s to Trading Rules), in order to
particular series of Index Fund Shares
Statement of the Purpose of, and incorporate priority rules and other
by means of an Information Circular
Statutory Basis for, the Proposed Rule features consistent with the System. In
prior to commencement of trading in
Change connection with the proposed changes
such series. The Exchange requires that
ETP Holders provide to all purchasers of 1. Purpose to the trading rules, the Exchange is also
a series of Index Fund Shares a written Background proposing changes to certain other
description of the terms and aspects of its rules as follows:
characteristics of such securities, in a The Exchange is proposing a series of 1. Revisions to Chapter I to
form prepared by the open-end rule changes in connection with a new incorporate new definitions and other
management investment company electronic trading system (the ‘‘System’’) general provisions;
issuing such securities, not later than the Exchange is developing to replace 2. One change to Chapter II
the time a confirmation of the first the Exchange’s current National concerning the ETP Holder admission
transaction in such series is delivered to Securities Trading System (‘‘NSTS’’). process and related provisions;
such purchaser. In addition, ETP The Exchange states that the System 3. Revisions to Chapter XV, to
Holders shall include such a written would provide for a new trading incorporate provisions relating to
description with any sales material platform and structure in order to take specifications for other products (e.g.,
relating to a series of Index Fund Shares advantage of opportunities in the exchange-traded funds) that are
that is provided to customers or the marketplace and the implementation of currently located in Chapter XI of the
public. Any other written materials Regulation NMS (‘‘Regulation NMS’’) Exchange’s Rules; and
provided by an ETP Holder to customers under the Act, as amended, and the 4. Certain other technical changes in
or the public making specific reference rules and regulations thereunder.4 The order to be consistent with the new
to a series of Index Fund Shares as an System would have different priority trading rules and related changes being
investment vehicle must include a rules than that of NSTS. For example, proposed.13
statement in substantially the following NSTS and the Exchange’s current Finally, in connection with the new
form: ‘‘A circular describing the terms trading rules allow preferencing by System and the proposed changes to the
and characteristics of [the series of dealers under certain circumstances.5 Exchange’s trading rules, the Exchange
Index Fund Shares] has been prepared The Exchange states that the System is requesting that the Commission
by the [open-end management (and the proposed rule change described approve NSX Securities LLC (‘‘NSX
investment company name] and is in this submission) would provide for Securities’’) to be a facility (as defined
available from your broker or the strict price-time priority execution, with in Section 3(a)(2) of the Act) of the
Exchange. It is recommended that you no priority of execution distinction Exchange.
obtain and review such circular before made for principal or agency orders.6 Trading Rules
purchasing [the series of Index Fund The proposed rule change, as
amended, also incorporates the trade- Chapter XI of the Exchange’s Rules is
Shares].’’ proposed to be substantially revised in
An ETP Holder carrying an omnibus through rule of Regulation NMS 7 by
requiring that, for any execution to order to accommodate the proposed
account for a non-ETP Holder broker-
occur on the Exchange during regular new market structure. The Exchange
dealer is required to inform such non-
trading hours,8 the price must be equal states that, although certain aspects of
ETP Holder that execution of an order
to or better than the national best bid or NSX’s current Chapter XI have been
to purchase a series of Index Fund
offer that is a ‘‘protected quotation’’ retained in part, as noted below, for the
Shares for such omnibus account will be
within the meaning of Regulation NMS most part proposed Chapter XI is not
deemed to constitute agreement by the
(the ‘‘Protected NBBO’’), unless an based on current Exchange Rules. In
non-ETP Holder to make such written
exception to the trade-through rule of general, the proposed Chapter is ordered
description available to its customers on
Regulation NMS is available.9 NSX as follows: (1) Introductory provisions,
the same terms as are directly
proposes to route orders that cannot be such as hours of trading and price
applicable to ETP Holders under this
executed at the Protected NBBO on the variations; (2) Registration and
rule.
Exchange to away markets for obligations of Market Makers (which are
Upon request of a customer, an ETP
execution.10 Finally, with the System optional in this proposed market
Holder shall also provide a prospectus
the Exchange proposes to retain an structure); (3) Access to the System; (4)
for the particular series of Index Fund
option for order delivery,11 but to Types of orders and messages that can
Shares.
require that Users requesting order be entered into the System; (5) Order
* * * * * priority and execution; and (6)
II. Self-Regulatory Organization’s 4 17
CFR 242.600 et seq. Clearance and settlement, clearly
Statement of the Purpose of, and 5 See
current NSX Rule 11.9, particularly NSX erroneous executions, and other
Statutory Basis for, the Proposed Rule Rules 11.9(l), (m) and (u). miscellaneous provisions.
6 See proposed NSX Rules 11.13 and 11.14.
Change 7 17 CFR 242.611.
12 See proposed NSX Rule 11.13(b).
In its filing with the Commission, the 8 ‘‘Regular Trading Hours’’ is defined as between
13 The Exchange states that a proposed new
Exchange included statements 8:30 a.m. and 3:00 p.m. Central Time. See proposed
Chapter XVI relating to dues, fees, assessments and

concerning the purpose of, and basis for, NSX Rule 1.5(R)(1). This is consistent with the other charges and Exchange rebate programs will be
definition of ‘‘regular trading hours’’ set forth in filed with the Commission by the Exchange at a
the proposal and discussed any Regulation NMS. See 17 CFR 242.600(b)(64). later date. This will replace the Exchange’s current
comments it received on the proposed 9 See proposed NSX Rule 11.15.
fee schedule contained in NSX Rule 11.10, which
rule change, as amended. The text of 10 See proposed NSX Rule 11.15(a)(ii).
is being removed in connection with the proposed
these statements may be examined at 11 See current NSX Rule 11.9(i). changes to Chapter XI described herein.
A. Hours of Trading, Units of Trading, No ETP Holder may act as a Market years within three years of the MMAT
Price Variations, and Securities Eligible Maker in any security on the Exchange application.24 The Exchange may grant
for Trading unless the ETP Holder is registered as a conditional registration as an MMAT
Proposed NSX Rule 11.1 generally Market Maker in the security.19 The subject to conditions the Exchange
provides for trading hours as Exchange plans to administer the deems appropriate in the interests of
determined by the Board of Directors of Market Maker application process in maintaining a fair and orderly market.25
the Exchange (the ‘‘Board’’), with notice similar fashion to its administration of The Exchange may also suspend or
to ETP Holders.14 Current NSX Rule applications for equity trading permits, withdraw the registration of an MMAT
11.1 provides for specific hours of which is described below. Market if (1) the MMAT has caused its Market
trading.15 The Exchange is proposing Makers must file an application for Maker to fail to comply with securities
this change to provide greater flexibility registration in the form prescribed by laws or the By-laws, Rules and
to respond to market conditions. The the Exchange. When reviewing such procedures of the Exchange; (2) the
Exchange is also proposing to set forth applications, the Exchange would MMAT is not properly performing its
the specific holidays it observes.16 consider factors such as the applicant’s responsibilities as an MMAT or has
NSX Rule 11.2 is proposed to be capital, operations, personnel, technical failed to meet the conditions of
changed to define 100 shares as a resources, and disciplinary history. registration described above; or (3) the
‘‘round lot,’’ any amount less than 100 Market Makers must maintain at least Exchange believes suspension or
shares as an ‘‘odd lot’’ and any amount the minimum net capital required under withdrawal is in the interest of
greater than 100 shares that is not a Rule 15c3–1 under the Act.20 The maintaining fair and orderly markets to
multiple of a round lot as a ‘‘mixed Exchange may suspend or terminate the suspend or withdraw the MMAT’s
lot’’.17 The Exchange is also proposing registration of a Market Maker if the registration.26 The Exchange would also
to remove current language in NSX Rule Exchange determines that (1) the Market withdraw the registration of an MMAT
11.2 and elsewhere relating to bonds, as Maker has substantially or continually upon the written request of the ETP
it has not traded bonds for many years. failed to engage in dealings in Holder for which the MMAT is
The Exchange states that the language accordance with the Exchange Rules; (2) registered.27
of proposed NSX Rule 11.3(a) is the Market Maker has failed to meet the Proposed NSX Rule 11.7 provides for
minimum net capital requirements a registration process for Market Makers
identical to the language of current NSX
described above; or (3) the Market in a particular security. Market Makers
Rule 11.3. Proposed NSX Rule 11.3(b)
Maker has failed to maintain fair and must register in a particular security by
requires that Crosses (as described in
orderly markets.21 A Market Maker may filing a security registration form with
proposed NSX Rule 11.12 and Section D
withdraw its registration by giving the Exchange. Unless otherwise
below) must improve each side of the
written notice to the Exchange, subject provided by the Exchange, such
Exchange’s best bid or offer (‘‘Top of
to the Exchange’s right to require a registration shall become effective on
Book’’) by at least $0.01 per share,
minimum prior notice period or to place the first business day following the
subject to limited exceptions as
such other conditions on withdrawal Exchange’s approval of the
described in Section D below. Proposed
(and re-registration following registration.28 In considering the
NSX Rule 11.4 provides that any class
withdrawal) as it deems appropriate in approval of a Market Maker’s
of securities listed or admitted to
the interests of maintaining fair and registration in a particular security, the
unlisted trading privileges on the
orderly markets.22 Exchange may consider the Market
Exchange may be designated for trading Proposed NSX Rule 11.6 provides for Maker’s financial resources; the Market
by the Exchange.18 the registration of Market Maker Maker’s experience, expertise and past
B. Market Makers Authorized Traders (‘‘MMATs’’) who performance in making markets; the
Proposed NSX Rules 11.5 through are permitted to enter orders for the Market Maker’s operational capability;
11.8 set forth the registration process account of the Market Maker for which the effect on competition among Market
and obligations of Market Makers. NSX they are registered. MMATs may be Makers; the Market Maker’s clearing
states that Market Makers are purely officers, partners, employees, or other arrangements; and the character of the
associated persons of Market Makers, market for the security.29 A Market
optional in this proposed market
and must register as an MMAT on the Maker may terminate its registration in
structure. The Exchange states that it
form prescribed by the Exchange.23 a security by giving written notice to the
does not expect Market Makers to play
MMATs must successfully complete a Exchange, subject to the Exchange’s
a significant role on the Exchange at the
‘‘Series 7’’ examination, unless the right to require a minimum prior notice
outset, but is including these provisions
Exchange waives this requirement for period or impose such other conditions
in order to provide flexibility as it
applicant MMATs who have served as as it deems appropriate in the interests
expands the System’s functionality to
dealer-specialists or market makers on of maintaining fair and orderly
provide for additional order types and
another national securities exchange or markets.30 Proposed NSX Rule 11.7(c)
other features that may make Market
association for at least two consecutive allows the Exchange to terminate such
Maker registration more attractive.
Proposed NSX Rule 11.5 provides for registration if the Market Maker has not
19 See proposed NSX Rule 11.5(a). Registered
a registration process for Market Makers. met its obligations as set forth in the
Market Makers will be designated as dealers on the
Exchange for all purposes under the Act and the
14 See 24 See proposed NSX Rule 11.6(b)(2).
proposed NSX Rule 11.1(a). rules and regulations thereunder.
15 See 25 See proposed NSX Rule 11.6(b)(4).
current NSX Rule 11.1(a). 20 See proposed NSX Rule 11.5(b).
16 See proposed NSX Rule 11.1(b). 21 See proposed NSX Rule 11.5(d). 26 See proposed NSX Rule 11.6(c)(1).
17 See proposed NSX Rule 11.2. 22 See proposed NSX Rule 11.5(e). 27 See proposed NSX Rule 11.6(b)(3).
28 Id.
18 This proposed Rule is generally consistent with 23 See proposed NSX Rule 11.6(b). Market Makers
29 See proposed NSX Rule 11.7(a).
current NSX Rule 11.9(b). Current Rules 11.4 and must ensure that their MMATs are in compliance
11.5 are proposed to be replaced in their entirety, with NSX Rules and are properly qualified to 30 See proposed NSX Rule 11.7(b). A Market
as they relate to trading ex-dividend and related perform market-making activities on the Exchange. Maker may also withdraw temporarily from its
issues that will no longer apply because no orders See proposed NSX Rule 11.6(b)(5). Market Makers Market Maker status in a security if legal or
will remain in the System beyond a single trading are responsible for the acts and omissions of their regulatory requirements necessitate. See proposed
day. MMATs. See proposed NSX Rule 11.8(c). NSX Rule 11.8(e).
Exchange Rules or has not maintained Sponsored Participant.38 The Sponsored orders would expire at the closing of
fair and orderly markets. Participant must also (1) agree to trading on the exchange where the
Proposed NSX Rule 11.8 sets forth comply with the Exchange’s Rules and security is listed. Unexecuted Day +
certain obligations of Market Makers. procedures as if the Sponsored orders would expire at the closing of
Market Makers generally must engage in Participant were an ETP Holder; (2) trading on NSX.45 Other order types
a course of dealings for their own maintain a current list of its Authorized permitted to be entered into the System
account to assist in the maintenance of Traders who may access the System on include Reserve Orders,46 Odd Lot and
fair and orderly markets on the behalf of the Sponsored Participant (and Mixed Lot Orders,47 Post Only Orders,48
Exchange.31 Market Makers are provide such list to the Sponsoring ETP and NSX Only Orders.49
specifically required, among other Holder and the Exchange on request); A Sweep Order type is provided for
things, to maintain continuous limit (3) familiarize its Authorized Traders in proposed NSX Rule 11.11(c)(7). A
orders to buy and sell for round lots in with the Sponsored Participant’s Sweep Order that is designated as a
those securities in which Market Makers obligations and assure that they receive ‘‘Protected Sweep Order’’ would be
is registered to trade; to comply with all appropriate training; (4) take reasonable converted into one or more limit orders
Exchange Rules; to inform the Exchange security precautions to prevent access to to be matched for execution against
of a material change in the financial or the System by anyone other than the protected quotations on the Exchange
operation condition or in the personnel Sponsored Participant’s Authorized and at away markets to the extent the
of the Market Maker; to maintain a Traders; and (5) establish adequate prices of such protected quotations are
current list of MMATs and provide an procedures and controls to effectively superior to the limit price of the Sweep
updated version of this list to the monitor the Sponsored Participant’s Order.50 A Sweep Order that is
Exchange upon any change in MMATs; employees, agents and customers’ use designated as a ‘‘Full Sweep Order’’
and to clear and settle transactions and access to the System.39 The would be converted into one or more
through the facilities of a registered Exchange intends to administer the limit orders to be matched for execution
clearing agency.32 Substantial or Sponsored Participant access provisions against the best available quotation on
continued failure to comply with these of proposed NSX Rule 11.9 in a fashion the Exchange and each other market
requirements may subject a Market similar to its current non-member give- (automated and manual) with a price
up rule.40 superior to the limit price of the Sweep
Maker to suspension or revocation of
Proposed NSX Rule 11.10 requires Order.51 The Exchange states that all
the Market Maker’s registration in one
that ETP Holders maintain a list of
or more securities, or other disciplinary Authorized Traders (‘‘ATs’’) who may 45 See proposed NSX Rule 11.11(b)(2)–(5).
action.33 obtain access to the System on behalf of 46 A Reserve Order is a limit order with a portion
C. Access to the System and Authorized the ETP Holder or the ETP Holder’s of the quantity displayed (the ‘‘displayed quantity’’)
Traders Sponsored Participant, and requires that and with a reserve, or undisplayed, portion of the
quantity (‘‘reserve quantity’’). See proposed NSX
an ETP Holder provide such list to the Rule 11.11(c)(2).
Orders may be entered on the System Exchange upon request.41 An ETP 47 See proposed NSX Rule 11.11(c)(3)–(4). Odd
only by Users who have obtained Holder must have reasonable Lot and Mixed Lot Orders are only eligible to be
authorized access by entering into a procedures to ensure that its ATs (1) protected quotations if aggregated to form a round
User Agreement with the Exchange in comply with all Exchange Rules and lot.
the form prescribed by the Exchange.34 other procedures relating to the System;
48 A Post Only Order is a limit order that is to
In addition to ETP Holders, non-ETP be posted on the Exchange and not routed away to
and (2) maintain the physical security of another trading center. A Post Only Order will be
Holders may enter into User Agreements the System and the equipment used to rejected without execution if it is immediately
and thereby access the System, subject access it.42 An ETP Holder must marketable on the System when entered. See
to the requirements of proposed NSX suspend or withdraw a person’s status proposed NSX Rule 11.11(c)(5).
49 An NSX Only Order is an order that is to be
Rule 11.9. A non-ETP Holder accessing as an AT if the Exchange so directs after cancelled (without routing away to another trading
the System is known as a ‘‘Sponsored determining that the AT has caused the center) if it cannot be executed on the Exchange
Participant.’’35 A Sponsored Participant, ETP Holder to fail to comply with the within the System’s execution parameters. See
to obtain access to the System, must be Exchange Rules.43 proposed NSX Rule 11.11(c)(6).
a registered broker or dealer and a self- 50 See proposed NSX Rule 11.11(c)(7)(i)(A). A
clearing member of a qualified clearing D. Types of Orders and Messages That Protected Sweep Order that is designated ‘‘Sweep
agency (‘‘Qualified Clearing Agency’’),36 May Be Entered Into the System and Post’’, meaning the unfilled portion of the
Sweep Order following the market sweep will be
and must enter into an agreement with Proposed NSX Rule 11.11 allows posted on the NSX Book, will be converted into one
a Sponsoring ETP Holder 37 pursuant to Users (i.e., ETP Holders and Sponsored or more limit orders and matched for execution
which the Sponsoring ETP Holder Participants) to enter market orders and against protected quotations with prices superior or
equal to the limit price of the Protected Sweep
agrees to be responsible for any and all limit orders with various time-in-force Order. See proposed NSX Rules 11.11(c)(7)(ii);
actions taken by or on behalf of the terms and other modifiers. The System 11.15(b)(i).
would not allow a time-in-force term If a limit order that has been converted from a
31 See proposed NSX Rule 11.8(a). longer than Day +.44 Unexecuted Day Protected Sweep Order cannot be executed against
32 See the protected quotation that it was routed to execute
proposed NSX Rule 11.8(a).
33 See proposed NSX Rule 11.8(d). Current NSX 38 See proposed NSX Rule 11.9(b). The
against because the protected quotation is no longer
available (due to a race condition), the limit order
Rules 11.6 through 11.9, which relate to various Sponsoring ETP Holder must also agree to pay
will be available for execution against other orders
types of trading on the Exchange, are proposed to when due any amounts arising from the Sponsored
in the applicable market that are priced the same
be replaced in their entirety with the proposed Participant’s access to the System. See proposed
as or better than such limit order.
Rules described herein. NSX Rule 11.9(b)(2)(B)(iii). 51 See proposed NSX Rule 11.11(c)(7)(i)(B). A Full
34 See proposed NSX Rule 11.9(a). 39 See proposed NSX Rule 11.9(b)(2)(D)–(H).
40 See Interpretation and Policy .03 of Section 2.4
Sweep Order that is designated ‘‘Sweep and Post’’,
35 See proposed NSX Rule 1.5(S)(1).
meaning the unfilled portion of the Sweep Order

36 ‘‘Qualified Clearing Agency’’ is defined in of the NSX Rules.
following the market sweep will be posted on the
proposed NSX Rule 15(Q)(1) as a clearing agency NSX Book, will be converted into one or more limit
42 See proposed NSX Rule 11.10(b), (d).
registered with the Commission pursuant to Section orders and matched for execution against the best
17A of the Act that is deemed qualified by the 43 See proposed NSX Rule 11.10(c).
available quotation on the Exchange and each other
Exchange. 44 See proposed NSX Rule 11.11(a)(3), which market (automated and manual) with a price
37 See proposed NSX Rule 1.5(S)(2). defines a Day + Order type. superior or equal to the limit price of the Full
limit orders converted from Protected Cross may improve the Top of Book by selecting order delivery demonstrate
Sweep Orders and Full Sweep Orders as little as one-half the minimum their ability to automatically process the
would be deemed intermarket sweep increment provided in NSX Rule inbound order and respond
orders under Regulation NMS 52 and 11.3(a), if it is priced at the midpoint of appropriately within 1⁄2 a second. If no
shall be so marked.53 A Sweep Order the Protected NBBO (or, prior to the response to an inbound order is
designated ‘‘Destination Sweep Order’’ compliance date for Rule 611 of received within 1⁄2 a second from a User
would be routed to an away trading Regulation NMS, if it is priced at the selecting order delivery, the User’s
center specified by the User, after the midpoint of the best bid and offer on the displayed order would be cancelled.65
order has been exposed to the System’s Exchange).59 A Clean Cross may be The Exchange is proposing to change
electronic file of orders (the ‘‘NSX executed on the System at a price equal the required response time from 1
Book’’).54 The System would also accept to or better than the Top of Book if (i) second to 1⁄2 a second in order to
incoming intermarket sweep orders it is for at least 5,000 shares and has an provide the Exchange with a ‘‘buffer’’ to
from other markets and would execute aggregate value of at least $100,000, (ii) ensure that the Exchange meets the
these consistent with the requirements neither side of the Cross is for the definition of an ‘‘automated trading
of Regulation NMS.55 account of the User, (iii) the size of the center’’ under Regulation NMS.66 Based
The System would allow Users to Cross is greater than the size of the total on current processing speeds in the
enter a ‘‘Destination Specific Order’’ interest on NSX at the Cross price, and securities industry, the Exchange
instructing the Exchange to route the (iv) following the compliance date for believes that its Users should have no
order to a specified away trading center, Rule 611 of Regulation NMS, it is at a problem complying with this required
after exposing the order to the NSX price equal to or better than the response time.
Book.56 The Exchange states that it has Protected NBBO.60 The Exchange states
E. Order Priority and Execution
included this order type in order to that the requirements of the Midpoint
allow Users to access manual markets if Cross and the Clean Cross are Proposed NSX Rules 11.14 and 11.15
they so choose. substantively similar to rules of other set forth the priority and execution
Proposed NSX Rule 11.11(e) allows a national securities exchanges.61 parameters of the System. The Exchange
User to cancel or replace an existing NSX Rule 11.12(e) requires that all states that orders are prioritized on a
order entered into the System by the Users entering a proprietary Cross strict price-time basis, first by price and
User, subject to certain limitations.57 No comply with the Exchange’s Customer then by time.67 Only the displayed
cancellation or replacement of an order Priority Rule (i.e., the price of the Cross portion of a Reserve Order has time
would be effective until the User has must be better than any customer order priority.68
received written confirmation of the the User is holding by at least $0.01). A Incoming orders (other than Sweep
cancellation and replacement from the User may also post a ‘‘Cross/Sweep’’ Orders) are first matched for execution
message that enters a Sweep Order for against orders in the NSX Book.69
Exchange.58
Proposed NSX Rule 11.12 allows a the account of the User sweeping all Proposed NSX Rule 11.15 reflects the
User to post a cross message (‘‘Cross’’) protected quotations that are superior to trade-through rule of Regulation NMS 70
on the System if the price of the trade the Cross price, and simultaneously by requiring that, for any execution on
is better than the best bid and offer on executes the Cross. In connection with NSX to occur during Regular Trading
any Cross/Sweep, the User must fully Hours (i.e., between 8:30 a.m. and 3:00
NSX, and (following the compliance
disclose the material facts relating to the p.m. Central Time), the price must be
date for Rule 611 of Regulation NMS) if
Sweep Order to any customer for whose equal to or better than the Protected
it is equal to or better than the Protected
account either side of the Cross is being NBBO unless the order is marked as an
NBBO. Crosses must improve each side
executed.62 intermarket sweep order or unless
of the Top of Book by at least one penny
Proposed NSX Rule 11.13(a) provides another exception to the trade-through
a share, except in the case of a Midpoint
that proprietary and agency orders shall rule of Regulation NMS is available.
Cross and a Clean Cross. A Midpoint
be subject to the same ranking and Orders that cannot be executed within
execution processes. Users must these parameters are eligible for routing
Sweep Order. See proposed NSX Rules
11.11(c)(7)(ii); 11.15(b)(ii). identify all orders as either proprietary to away trading centers for execution at
If a limit order that has been converted from a or agency, and for all agency orders, the Protected NBBO.
Full Sweep Order cannot be executed against the must include an identifier that enables Unless the terms of the order direct
quotation that it was routed to execute against the User to identity the User’s customer otherwise, any order other than a Sweep
because the quotation is no longer available (due to Order that cannot be executed on the
a race condition), the limit order will be available on whose behalf the order is being
for execution against other orders in the applicable entered.63 Exchange would be converted into one
market that are priced the same as or better than Proposed NSX Rule 11.13(b) contains or more limit orders, as necessary, to
such limit order. the Exchange’s proposed order delivery match the price of each protected
52 17 CFR 242.600(b)(30).
rule. The Exchange states that this rule quotation at the Protected NBBO
53 See proposed NSX Rule 11.11(c)(7)(iv).
is substantively identical to the available at away markets, and these
54 See proposed NSX Rule 11.11(c)(7)(i)(C).
55 See proposed NSX Rule 11.11(c)(9).
Exchange’s current order delivery limit orders would be routed to the
56 See proposed NSX Rule 11.11(c)(8). rule,64 except that it requires that Users applicable market for execution against
57 These limitations include the following: (1) An the applicable protected quotation at the
order may only be cancelled or replaced if it has
59 See
proposed NSX Rule 11.12(c). Protected NBBO.71
a time-in-force term longer than immediate-or- 60 See
proposed NSX Rule 11.12(d). Pursuant to Unless the terms of the order direct
cancel and if the order has not yet been executed; proposed NSX Rule 11.3(b), Clean Crosses may not otherwise, any order not executed in
(2) An order routed to another trading center that be executed in increments smaller than those
the User wishes to cancel will be placed in a permitted by NSX Rule 11.3(a).
65 See proposed NSX Rule 11.13(b).
61 See, e.g., PCX Equities, Inc. Rule 7.6(a),
‘‘Cancel Pending’’ state until the routing process is
66 17 CFR 242.600(b)(4).
completed, and executions received while an order Commentary .05, and Rule 7.31(y) (relating to
is in a ‘‘Cancel Pending’’ state will be processed Midpoint Cross); Boston Stock Exchange Rules
normally; and (3) Only the price and quantity terms Chapter II, Section 18 (relating to Clean Cross). 68 See proposed NSX Rule 11.14(a)(4).
62 See proposed NSX Rule 11.12(f). 69 See proposed NSX Rule 11.15(a)(i).
of an order may be changed by a replace message.
See proposed NSX Rule 11.11(e)(i)–(iii). 63 See proposed NSX Rule 11.13(a). 70 17 CFR 242.611.
58 See proposed NSX Rule 11.11(e)(iv). 64 See current NSX Rule 11.9(i). 71 See proposed NSX Rule 11.15(a)(ii).
full on the Exchange which by its terms specificity the categories of actions for all or a portion of the order to sell.’’75
is not eligible for routing away, or which the Exchange would not be The Exchange states that only the initial
which is not executed in full when liable. Second, proposed NSX Rule offsetting transaction leg of an
routed away, would be ranked in the 11.8(B) contains an agreement by each appropriately designated riskless
NSX Book in accordance with order ETP Holder to release and discharge the principal transaction would be
priority rules of proposed NSX Rule Exchange and its related persons from submitted by the Exchange to the
11.14.72 all claims and damages arising from the appropriate consolidated tape.76 An
Sweep Orders would be matched for ETP Holder’s use of the facilities of the ETP Holder must have written policies
execution in the NSX Book to the extent Exchange (including the System). Third, and procedures to assure compliance
possible at the Protected NBBO, and proposed NSX Rule 11.8(C) contains a with this proposed Rule, which must
simultaneously converted into one or disclaimer by the Exchange of any and
more limit orders and routed to away require (at a minimum) that the
all express or implied warranties customer order be received prior to the
markets to be matched for execution relating to the System.
against quotations in accordance with offsetting transactions, and that the
Proposed NSX Rule 11.19 provides for second offsetting transaction leg be
the terms of the Sweep Order (as a review process for determining clearly
described in Section D above).73 executed within 60 seconds of the
erroneous executions. The process
Proposed NSX Rule 11.15(d) states initial offsetting transaction leg.77 The
generally involves a review by an
that the System would be operated as a Exchange officer upon request of an ETP Exchange’s customer priority rules
‘‘automated market center’’ within the Holder (which must submitted within applicable to proprietary trading would
meaning of Regulation NMS, and would 15 minutes of the trade in question), not apply to a riskless principal
display automated quotations at all with an appeal to a Clearly Erroneous transaction meeting the standards of
times except in the event that a systems Execution Panel available for parties NSX Rule 11.23 that is executed by an
malfunction renders the System affected by the officer’s determination.74 ETP Holder to facilitate the execution of
incapable of displaying automated a customer order.78
Proposed NSX Rule 11.20
quotations. The Exchange states that it
incorporates the New York Stock Other Proposed Rule Changes
would communicate to its ETP Holders
Exchange’s ‘‘circuit breaker’’ tests based
its procedures relating to any change A. Chapter I—Adoption, Interpretation,
upon reductions to the Dow Jones
from automated to manual quotations in and Application of Rules; Definitions
Industrial Average. Proposed NSX Rule
the event of such a systems malfunction.
11.21, relating to short sales, requires
F. Other Trading-Related Rules that all short sale orders entered into the Chapter I is proposed to be revised to
System be identified either as ‘‘short incorporate certain new definitions and
Proposed NSX Rules 11.16 through other provisions relating to the
11.22 relate to other trading-related sale’’ or ‘‘short sale exempt’’. It also
provides that any marketable order proposed trading rule changes described
matters such as clearance and
entered in the System which, if matched above. Specifically, proposed NSX Rule
settlement, clearly erroneous
for execution, would violate the short 1.4 provides for different effective times
executions, trading halts, short sales,
sale provisions under the Act and, of certain of the new trading rules
and locked and crossed markets.
Purposed NSX Rule 11.16 describes the therefore, would be cancelled. described above. Proposed NSX Rule 1.4
Exchange’s trade reporting processes. Proposed NSX Rule 11.22 relates to provides that the Exchange’s proposed
Pursuant to proposed NSX Rule 11.16, locking or crossing quotations and is rule relating to Sweep Orders (proposed
the Exchange would report all substantively identical to the proposed NSX Rule 11.11(c)(7)(iv)) shall not
executions occurring on the System to rule language that was provided to NSX become effective until the compliance
an appropriate consolidated transaction and other national securities exchanges date for Rule 611 of Regulation NMS,
reporting system to the extent required by the Commission. and provides that the proposed Trading
by law, and would promptly notify Proposed NSX Rule 11.23 relates to Rules relating to the trade-through rule
Users of all executions of their orders as riskless principal transactions. A and locked and crossed markets (i.e.,
soon as executions take place. ‘‘riskless principal transaction’’ is proposed NSX Rules 11.15 and 11.22)
Proposed NSX Rule 11.17 covers defined as ‘‘two offsetting principal shall only apply to quotations for
clearance and settlement. Proposed NSX transaction legs in which an ETP securities subject to the Intermarket
Rule 11.17(a) requires that each ETP Holder, (i) after having received an Trading System Plan until the
Holder either be a member of a order to buy a security that it holds for compliance date for those sections of
Qualified Clearing Agency or clear execution on the Exchange, purchases Regulation NMS relating to trade-
transactions executed on the Exchange the security as principal at the same throughs and locked and crossed
through another ETP Holder that (i) is price, exclusive of markups, markets, respectively.
a member of a Qualified Clearing markdowns, commissions and other
Agency and (ii) agrees to be responsible fees, to satisfy all or a portion of the NSX Rule 1.5 is proposed to be
for such clearance and settlement. The order to buy or (ii) after having received revised to include a number of
Exchange states that trading on the an order to sell a security that it holds additional definitions used in the
System would be on an anonymous for execution on the Exchange, sells the proposed changes to Chapter XI.
basis. security as principal at the same price,
The Exchange states that proposed exclusive of markups, markdowns, 75 Proposed NSX Rule 11.23(a).
NSX Rule 11.18 is based on NSX’s commissions and other fees, to satisfy 76 See proposed NSX Rule 11.23(b).
77 See proposed NSX Rule 11.23(c). ETP Holders
current limitation of liability rule set
forth in NSX Rule 11.9(t), but has been must also have supervisory systems that produce
74 See proposed NSX Rule 11.19(c). In addition to
the process provided for in proposed NSX Rule records enabling the ETP Holder and the Exchange
expanded in three ways. First, proposed to accurately and readily reconstruct, in a time-
11.19, the Exchange has adopted internal guidelines
NSX Rule 11.18 describes with greater concerning clearly erroneous executions. The sequenced manner, all orders related to each
Exchange states that its staff uses these guidelines riskless principal transaction. See proposed NSX
72 See proposed NSX Rule 11.15(a)(iii). to help determine what constitutes a clearly Rule 11.23(c).
73 See proposed NSX Rule 11.15(b). erroneous execution. 78 See proposed NSX Rule 12.6(d).
B. Chapter II—Equity Trading Permits restrictions on trade-throughs and Securities would be subject to exchange
and ETP Holders locked and crossed markets that are non-discrimination requirements.82
In Chapter II, relating to ETPs and consistent with Regulation NMS and the Pursuant to Rule 17d–1 under the Act,
ETP Holders, Interpretation .03 under Commission’s guidance on these issues. where a member of the Securities
NSX Rule 2.4 is proposed to be deleted, The Exchange is not proposing any Investor Protection Corporation is a
because it is being substantively additional changes to Chapter XIV member of more than one self-regulatory
replaced by proposed NSX Rule 11.9 relating to the Intermarket Trading organization (‘‘SRO’’), the Commission
providing for Sponsored Participants. System (‘‘ITS’’) Plan at this time, shall designate to one of such
because it understands that the ITS Plan organizations the responsibility for
C. Chapter XV—Listed Securities and will be phased out of existence and
Other Exchange Products examining such member for compliance
replaced with new linkages in the near with the applicable financial
Chapter XV is proposed to be revised future in connection with the responsibility rules.83 The SRO
to move provisions relating to implementation of Regulation NMS. designated by the Commission is
specifications for certain products (e.g. NSX Securities, LLC referred to as a ‘‘Designated Examining
index funds) from NSX Rules 11.9(v)– Authority.’’ As noted above, NSX
(x) to Chapter XV.79 The Exchange states In connection with the proposed Securities is applying to become an ETP
that certain terminology and cross- changes to the trading rules described Holder of the Exchange, and has applied
reference changes have been made to above, the Exchange requests that the for membership in the NASD. The
these provisions, but no substantive Commission approve NSX Securities, NASD is an SRO not affiliated with NSX
changes have been made. LLC (‘‘NSX Securities’’) to be a facility or any of its affiliates. NSX understands
(as defined in Section 3(a)(2) of the Act) that, once NSX Securities is approved as
D. Other Technical Changes To Rules of the Exchange. a member of the NASD, the NASD
The Exchange states that other The Exchange states that NSX would become the Designated
technical changes are proposed to be Securities, a wholly-owned subsidiary Examining Authority for NSX Securities
made to certain provisions of the NSX of the Exchange, is registering as a pursuant to Rule 17d–1 of the Act with
Rules in order to be consistent with the broker-dealer, has applied for the responsibility for examining NSX
proposed changes described above. membership in the National Association Securities for compliance with the
These changes include the following: of Securities Dealers, Inc. (‘‘NASD’’),
1. A change to Interpretation .01 of applicable financial responsibility rules.
and is applying to become an ETP
NSX Rule 3.6, requiring that all ETP Holder. The Exchange states that NSX ETP Holders’ use of NSX Securities to
Holders who handle customer orders on Securities plans to provide an optional route orders to another Trading Center
the Exchange establish and enforce routing service for the Exchange, in would be optional, as described above.
fixed standards for queuing and which NSX Securities would route Those ETP Holders who choose to use
executing customer orders. This orders to other securities exchanges, the Outbound Routing service of NSX
interpretation formerly only applied to facilities of securities exchanges, Securities must sign an NSX Securities
Designated Dealers on the Exchange. As automated trading systems, electronic Routing Agreement (which is
the position of Designated Dealer is communications networks or other incorporated into the Exchange’s User
proposed to be removed in connection brokers or dealers (collectively, Agreement). Among other things, the
with the proposed new market ‘‘Trading Centers’’) from the Exchange NSX Securities Routing Agreement
structure, this interpretation is proposed (such function of NSX Securities is provides that all orders routed through
to be revised to apply to all ETP referred to as the ‘‘Outbound Router’’).81 NSX Securities are subject to the terms
Holders. and conditions of the Exchange Rules.
NSX states that, as an Outbound
2. NSX Rule 5.5 (relating to ‘‘Chinese The Exchange recognizes that after its
Router, NSX Securities would receive
Wall’’ procedures) is proposed to be demutualization becomes effective,84 its
instructions from the Exchange, route
revised to apply to any ETP Holder that ownership of NSX Securities ‘‘ by virtue
orders to other Trading Centers in
trades for its own account in a security of NSX Securities being an ETP Holder
accordance with those instructions and
or has a specialist operation in a ‘‘ would be in violation of proposed
be responsible for reporting resulting
security.80 limitations 85 to be set forth in the
3. The interpretations under NSX executions back to the Exchange. In
addition, all orders routed through NSX Exchange Rules, unless the Exchange’s
Rule 12.6, the Exchange’s Customer
Priority Rule, are proposed to be revised Securities would be subject to the terms
to apply to all ETP Holders that conduct and conditions of the Exchange Rules. 82 See, e.g., Section 6(b)(5) of the Act, 15 U.S.C.
78f(b)(5).
both proprietary and agency trading, NSX states that it would regulate the 83 17 CFR 240.17d–1. Pursuant to Rule 17d–1
rather than only Designated Dealers. Outbound Router function of NSX under the Act, in making such designation the
4. NSX Rule 14.9, relating to Securities as a facility (as defined in Commission shall take into consideration the
Intermarket Trading System ‘‘trade- Section 3(a)(2) of the Act) subject to regulatory capabilities and procedures of the SROs,
Section 6 of the Act. As such, the availability of staff, convenience of location,
throughs’’ and locked and crossed unnecessary regulatory duplication, and such other
markets, is proposed to be deleted Exchange states that the Outbound factors as the Commission may consider germane to
simultaneously with the compliance Router function of NSX Securities the protection of investors, the cooperation and
date for those provisions of Regulation would be subject to the Commission’s coordination among self-regulatory organizations,
continuing oversight. In particular, and and the development of a national market system
NMS relating to trade-throughs and for the clearance and settlement of securities
locked and crossed markets. The without limitation, under the Act, NSX transactions.
Exchange believes this change is states that it is responsible for filing 84 See Securities Exchange Act Release Nos.
with the Commission rule changes and 53721 (April 25, 2006), 71 FR 26155 (May 3, 2006)
appropriate because proposed NSX

fees relating to the NSX Securities (notice of filing of File No. SR–NSX–2006–03)
Rules 11.15 and 11.22 provide (‘‘Demutualization Rule Filing’’); and 53963 (June 8,
Outbound Router function, and NSX 2006), 71 FR 34660 (June 15, 2006) (order approving
79 See proposed NSX Rules 15.10–15.12. File No. SR–NSX–2006–03).
80 The Rule currently only applies to Designated 81 The optional routing of orders to away markets 85 See proposed NSX Rule 2.10 on page 146 of the
Dealers. by the System is described above. Demutualization Rule Filing.
ownership of NSX Securities is and NSX Securities set forth above change, as amended, is consistent with
approved by the Commission. would address the potential conflict of the Act. Comments may be submitted by
The Exchange further recognizes that interest with the regulatory any of the following methods:
the ownership of NSX Securities by the responsibilities of the Exchange and the
Exchange may pose a conflict of interest ownership and operation of NSX Electronic Comments
between the regulatory responsibilities Securities by the Exchange. • Use the Commission’s Internet
of the Exchange and the broker or dealer Consequently, subject to the proposed
activities of NSX Securities. This is comment form (http://www.sec.gov/
undertakings set forth above, the
because the financial interests of the rules/sro.shtml); or
Exchange requests that the Commission
Exchange may conflict with the approve NSX Securities to be a facility • Send an e-mail to rule-
responsibilities of the Exchange as an (as defined in Section 3(a)(2) of the comments@sec.gov. Please include File
SRO regarding NSX Securities. Act)88 of the Exchange. Number SR–NSX–2006–08 on the
The Exchange believes, however, that subject line.
such conflict may be mitigated with the 2. Statutory Basis
following proposed undertakings of the The Exchange believes the proposed Paper Comments
Exchange and NSX Securities. rule change, as amended, is consistent • Send paper comments in triplicate
A. Proposed Undertakings with Section 6(b) of the Act 89 in to Nancy M. Morris, Secretary,
general, and furthers the objectives of Securities and Exchange Commission,
Each of the Exchange and NSX Section 6(b)(5) 90 in particular, in that it
Securities undertakes as follows: 100 F Street, NE, Washington, DC
is designed to promote just and
1. The Exchange will regulate the 20549–1090.
equitable principles of trade and to
Outbound Router function of NSX All submissions should refer to File
remove impediments to and perfect the
Securities as a facility (as defined in Number SR–NSX–2006–08. This file
mechanism of a free and open market
Section 3(a)(2) of the Act), subject to number should be included on the
and a national market system and,
Section 6 of the Act. In particular, and subject line if e-mail is used. To help the
generally, in that it protects investors
without limitation, under the Act, the
and the public interest. Commission process and review your
Exchange will be responsible for filing
comments more efficiently, please use
with the Commission rule changes and B. Self-Regulatory Organization’s
fees relating to the NSX Securities only one method. The Commission will
Statement on Burden on Competition
Outbound Router function and NSX post all comments on the Commission’s
The Exchange does not believe that Internet Web site (http://www.sec.gov/
Securities will be subject to exchange
the proposed rule change, as amended, rules/sro.shtml). Copies of the
non-discrimination requirements.
2. NASD, an SRO unaffiliated with will impose any inappropriate burden submission, all subsequent
the Exchange or any of its affiliates, will on competition. amendments, all written statements
carry out oversight and enforcement C. Self-Regulatory Organization’s with respect to the proposed rule
responsibilities as the Designated Statement on Comments on the change that are filed with the
Examining Authority designated by the Proposed Rule Change Received From Commission, and all written
Commission pursuant to Rule 17d–1 of Members, Participants, or Others communications relating to the
the Act with the responsibility for proposed rule change between the
The Exchange has neither solicited
examining NSX Securities for Commission and any person, other than
compliance with the applicable nor received written comments on the
proposed rule change, as amended. those that may be withheld from the
financial responsibility rules. public in accordance with the
3. An ETP Holder’s use of NSX III. Date of Effectiveness of the provisions of 5 U.S.C. 552, will be
Securities to route orders to another Proposed Rule Change and Timing for available for inspection and copying in
Trading Center will be optional. Any Commission Action the Commission’s Public Reference
ETP Holder that does not want to use
NSX Securities may use other routers to Within 35 days of the date of Room. Copies of such filing also will be
route orders to other Trading Centers.86 publication of this notice in the Federal available for inspection and copying at
4. NSX Securities will not engage in Register or within such longer period (i) the principal office of the NSX. All
any business other than (1) its as the Commission may designate up to comments received will be posted
Outbound Router function and (2) any 90 days of such date if it finds such without change; the Commission does
other activities it may engage in as longer period to be appropriate and not edit personal identifying
approved by the Commission.87 publishes its reasons for so finding or information from submissions. You
NSX is reflecting these undertakings (ii) as to which the Exchange consents, should submit only information that
in proposed NSX Rule 2.11. the Commission will: you wish to make available publicly. All
(a) by order approve such proposed submissions should refer to File
B. Request for Approval rule change, as amended; or Number SR–NSX–2006–08 and should
In sum, the Exchange believes that the (b) institute proceedings to determine be submitted on or before July 27, 2006.
proposed undertakings of the Exchange whether the proposed rule change, as
amended, should be disapproved. For the Commission, by the Division of
86 An ETP Holder may choose to enter a Post Only Market Regulation, pursuant to delegated
Order or an NSX Only Order into the System. The IV. Solicitation of Comments authority.91
terms of each such order provide that, if the order
is not executable on the System, the order will be
Interested persons are invited to Nancy M. Morris,
cancelled and returned to the ETP Holder, at which submit written data, views, and Secretary.
time the ETP Holder could choose to route the order arguments concerning the foregoing, [FR Doc. 06–5961 Filed 7–5–06; 8:45 am]
to another market. See proposed NSX Rule including whether the proposed rule
11.11(c)(5)–(6). BILLING CODE 8010–01–P
87 NSX Securities’ outbound routing function
88 15 U.S.C. 78c(a)(2).
includes the clearing functions that it may perform
89 15 U.S.C. 78f(b).
for trades with respect to orders routed to other
trading centers. 90 15 U.S.C. 78f(b)(5). 91 17 CFR 200.30–3(a)(12).

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Thursday,

SECURITIES AND EXCHANGE RULES OF NATIONAL STOCK N. [Reserved.]

delayed compliance date for Rule 611 of Regulation

System Exchange and is providing outbound Maker on the Exchange, or has a

* * * * * exchange or Nasdaq with the greatest

regulatory fees. defined as transactions conducted in

(a) An ETP Holder shall maintain a

Chapter XVI relating to dues, fees, assessments and

meaning the unfilled portion of the Sweep Order

74 See proposed NSX Rule 11.19(c). In addition to

appropriate because proposed NSX

Dealers. by the System is described above. Demutualization Rule Filing.

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