Self-Regulatory Organizations; National Stock Exchange; Order Approving Proposed Rule Change, and Amendment Nos. 1, 2, and 3, Thereto, Relating to the Creation of a Regulatory Oversight Committee, 70648-70650 [E5-6409]

Download as PDF 70648 Federal Register / Vol. 70, No. 224 / Tuesday, November 22, 2005 / Notices 3 and CNS fail positions. The provisions of Appendix 1 (Version 2 of Procedure XV and Version 2 of Addendum B) will be moved into the body of the rules in place of Version 1 of Procedure XV and Version 1 of Addendum B where they will appear in numerical order. As part of these clarifications, Rule 4 (Clearing Fund) is also being corrected to make clear that participants may request a return of any excess clearing fund on any day that NSCC has determined that the participant’s actual deposit exceeds its required deposit. Finally, certain technical corrections are being made to Rule 4 and to the clearing fund formula to provide consistent terminology and delete obsolete references. III. Discussion Section 19(b) of the Act directs the Commission to approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such organization. Section 17A(b)(3)(F) of the Act requires that the rules of a clearing agency be designed to assure the safeguarding of securities and funds which are in its custody or control or for which it is responsible.9 The Commission believes that NSCC’s rule change is consistent with this Section because it will permit NSCC to better assure the safeguarding of funds and securities which are in its custody or control or for which it is responsible by allowing NSCC to more precisely identify the risks posed by a participant’s unsettled portfolio and more quickly adjust and collect additional needed clearing fund collateral than it could using the old formula. As a result NSCC should be better protected from the risk associated with a participant’s default because the clearing fund deposits it collects should more accurately reflect NSCC’s exposure. IV. Conclusion On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act and in particular Section 17A of the Act and the rules and regulations thereunder. It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (File No. SR– NSCC–2005–13) be and hereby is approved. 9 15 U.S.C. 78q–1(b)(3)(F). VerDate Aug<31>2005 17:22 Nov 21, 2005 Jkt 208001 For the Commission by the Division of Market Regulation, pursuant to delegated authority.10 Jonathan G. Katz, Secretary. [FR Doc. E5–6410 Filed 11–21–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52774; File No. SR–NSX– 2005–07] Self-Regulatory Organizations; National Stock Exchange; Order Approving Proposed Rule Change, and Amendment Nos. 1, 2, and 3, Thereto, Relating to the Creation of a Regulatory Oversight Committee November 15, 2005. I. Introduction On August 1, 2005, the National Stock Exchange SM (‘‘NSX’’ SM or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to create a Regulatory Oversight Committee (‘‘ROC’’). Notice of the proposed rule change, as amended, was published for comment in the Federal Register on October 14, 2005.3 No comments were received regarding the proposal. This order approves the proposed rule change, as amended. II. Description of the Proposed Rule Change NSX proposes to amend the text of Article VI, Section 1.1 of the Exchange’s By-Laws to allow it to create, and specifically identify, a ROC that would be subject to the control and supervision of NSX’s Board of Directors (‘‘NSX Board’’). The NSX also proposes to establish a Regulatory Oversight Committee Charter (‘‘ROC Charter’’) that would set forth the functions, scope of responsibilities and composition of the ROC. NSX filed the proposed rule change in accordance with undertakings made by it and as set forth in Section III.F.1. of the Order Instituting Administrative and Cease-And-Desist Proceedings Pursuant to Sections 19(b) and 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing 10 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 52573 (October 7, 2005), 70 FR 60113 (‘‘Notice’’). 1 15 PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 Sanctions entered May 19, 2005.4 In its filing, NSX represented that the ROC Charter would include provisions that mirror the terms of its undertaking to the Commission and certification procedures that are consistent with the certification procedures contained in the Order.5 Pursuant to the ROC Charter, the ROC shall be responsible for overseeing all of NSX’s regulatory functions and responsibilities and to advise regularly NSX’s Board about NSX’s regulatory matters.6 Specifically, the ROC shall: 7 (i) Oversee NSX’s regulatory functions to enforce compliance with the federal securities laws and NSX rules, including monitoring the design, implementation, and effectiveness of NSX’s regulatory programs; (ii) recommend to the NSX Board an adequate operating budget for NSX’s regulatory functions; (iii) approve the promulgation, filing, or issuance of new rules, rule amendments, rule interpretations, and regulatory circulars; (iv) take any other action necessary to fulfill its oversight and advisory responsibilities; and (v) adopt policies and procedures to ensure the independence of NSX’s Chief Regulatory Officer (the ‘‘CRO’’). The ROC shall also: • Be authorized to retain, at NSX’s expense, outside counsel and consultants as it deems appropriate to carry out its responsibilities; 8 • On at least an annual basis, report to the NSX Board on the state of the Exchange’s regulatory program; and 9 • Create and maintain complete minutes of all of its meetings, and create and maintain records reflecting the ROC’s recommendations or proposals made to NSX Board, and NSX Board’s decision as to each such recommendation proposal.10 In the event that the ROC’s recommended operating budget for NSX’s regulatory functions either: (1) Is less than the previous year’s budget by a material amount, (2) is rejected by the NSX Board, (3) is reduced by the NSX Board by a material amount, or (4) is altered by the NSX Board in a manner that, in the judgment of the ROC, materially impairs the ability of NSX to meet its regulatory obligations, then NSX shall, within fifteen (15) business 4 See In the Matter of National Stock Exchange and David Colker, Securities Exchange Act Release No. 51715 (May 19, 2005) (‘‘Administrative Order’’) at Section III.F.1. 5 See Notice. 6 Proposed ROC Charter. 7 Proposed ROC Charter, Section A. 8 Proposed ROC Charter, Section B. 9 Proposed ROC Charter, Section C. 10 Proposed ROC Charter, Section D. E:\FR\FM\22NON1.SGM 22NON1 Federal Register / Vol. 70, No. 224 / Tuesday, November 22, 2005 / Notices days of such NSX Board action, notify the Director of the Commission’s Division of Market Regulation in writing, providing copies of all minutes and other records reflecting the ROC’s budget proposal and the NSX Board’s decision regarding such proposal.11 The CRO shall certify compliance with the required items of the Administrative Order to the ROC on a form and frequency basis set by the ROC, and shall have the authority to require such additional compliance certification from the staff as he deems appropriate and in such forms as he may prescribe.12 In accordance with the functions and responsibilities set forth above, the ROC shall perform certain oversight functions with respect to the CRO and other regulatory personnel. Specifically, NSX represented in its filing that the ROC shall: 13 • Review with the Exchange’s CRO and other appropriate regulatory personnel various aspects of the design, implementation, and effectiveness of NSX’s regulatory programs; • Review, revise, or approve the CRO’s recommendation for a regulatory budget to formulate the ROC’s recommendation of an adequate operating budget and staffing level for NSX’s regulatory function to the Board; • Review, evaluate, and, if appropriate, recommend to the Board the implementation of any and all actions recommended by the CRO and the Regulatory Services Division (‘‘NSX Regulatory Division’’) to fulfill the NSX Regulatory Division’s and the ROC’s oversight and advisory responsibilities; • Assess the performance of the CRO and review the CRO’s assessment of the NSX Regulatory Division’s staff in fulfilling their responsibilities and recommend compensation and personnel actions to the NSX Board; and • Review, amend, approve or reject the CRO’s recommendations respecting the promulgation, filing, or issuance of new rules, rule amendments, rule interpretations, and regulatory circulars, including the approval (or ratification) of all regulatory circulars issued by the NSX within thirty five days of the issuance of such regulatory circulars. In addition, NSX represented that, on at least an annual basis, the ROC will review the structural protections that separate NSX’s regulatory function from its commercial interests by reviewing the supervisory responsibilities of its Chief Executive Officer (‘‘CEO’’) and CRO. Further, the ROC will take all 11 Proposed ROC Charter, Section E. ROC Charter, Section A. 13 See Notice. 12 Proposed VerDate Aug<31>2005 17:22 Nov 21, 2005 Jkt 208001 steps necessary to provide reasonable assurance that NSX is and remains in compliance with the Administrative Order and will take any other action necessary to fulfill its oversight and advisory responsibilities.14 The ROC shall be comprised of no less than three members, who have been appointed by NSX’s Chairman with the approval of the NSX Board in a composition consistent with federal securities laws and NSX’s By-Laws and Rules. At a minimum, the ROC members shall not be, nor have been during the preceding three years, employees of NSX or any NSX member firm. The ROC shall elect a Chairperson from among its members.15 III. Discussion and Commission Findings The Commission has reviewed the proposed rule change, as amended, and finds that it is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange.16 Specifically, the Commission finds that the proposed rule change, as amended, furthers the objectives of Section 6(b)(1) 17 of the Act, which requires the Exchange to be so organized and have the capacity to be able to carry out the purposes of the Act and to comply, and to enforce compliance by its members, with the Act and the rules of the Exchange. In addition, the Commission finds that the proposed rule change, as amended, is consistent with Section 6(b)(5) of the Act,18 which requires, among other things, that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. An exchange’s governance structure should be designed to assure that its regulatory function is strong, vigorous, and sufficiently independent and insulated from improper influence from management or any regulated entity. In the Commission’s view, the proposal is designed to advance this goal. The proposed amendments provide for a ROC which will be composed of members that shall not be, nor have been during the preceding three years, employees of NSX or any NSX member 70649 firm. The ROC will be responsible for oversight of all of NSX’s regulatory functions and responsibilities, including, among other things, approving new NSX rules and adopting policies and procedures to ensure the independence of the NSX’s CRO. Also, the ROC will review, on at least an annual basis, the structural protections that separate NSX’s regulatory function from its commercial interests by reviewing the supervisory responsibilities of NSX’s CEO and CRO.19 The Commission believes that these proposed amendments to the NSX’s governance structure will add a degree of independence that should serve to insulate NSX’s regulatory activity from its economic interests. As noted above, the Commission notes that NSX filed the proposed rule change in accordance with its undertakings as set forth in the Administrative Order, and represented that the proposed rule change includes provisions that mirror the terms of the undertaking. The Commission believes that in this context, the Exchange’s proposal is consistent with the statutory requirements under Section 6(b)(1) of the Act.20 The Commission notes that it is in the process of reviewing a range of governance issues relating to selfregulatory organizations (‘‘SROs’’), including possible steps to strengthen the framework for the governance of SROs and ways to improve the transparency of the governance procedures for all SROs, and has proposed rules in furtherance of this goal, including proposed rules relating to an exchange’s ROC.21 Depending on the results of the proposed rules, NSX may be required to make further changes to strengthen its governance structure and ensure that its ROC continues to comply with federal securities laws. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,22 that the proposed rule change (File No. SR– NSX–2005–07) and Amendment Nos. 1, 2, and 3, thereto be, and hereby are, approved. 14 Id. 15 Proposed ROC Charter. approving this proposed rule change, the Commission notes that it has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 17 15 U.S.C. 78f(b)(1). 18 15 U.S.C. 78f(b)(5). 16 In PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 19 See supra note 14 and accompanying text. U.S.C. 78f(b)(1). 21 See Securities Exchange Act Release No. 50699 (November 18, 2004), 69 FR 71126 (December 8, 2004). 22 15 U.S.C. 78s(b)(2). 20 15 E:\FR\FM\22NON1.SGM 22NON1 70650 Federal Register / Vol. 70, No. 224 / Tuesday, November 22, 2005 / Notices For the Commission, by the Division of Market Regulation, pursuant to delegated authority.23 Jonathan G. Katz, Secretary. [FR Doc. E5–6409 Filed 11–21–05; 8:45 am] BILLING CODE 8010–01–P SMALL BUSINESS ADMINISTRATION Data Collection Available for Public Comments and Recommendations Notice and request for comments. ACTION: SUMMARY: In accordance with the Paperwork Reduction Act of 1995, this notice announces the Small Business Administration’s intentions to request approval on a new and/or currently approved information collection. DATES: Submit comments on or before January 23, 2006. ADDRESSES: Send all comments regarding whether this information collection is necessary for the proper performance of the function of the agency, whether the burden estimates are accurate, and if there are ways to minimize the estimated burden and enhance the quality of the collection, to Gail Hepler, Chief 504 Program Branch, Office of Financial Assistance, Small Business Administration, 409 3rd Street, SW., Suite 8300, Washington, DC 20416. FOR FURTHER INFORMATION CONTACT: Gail Hepler, Chief, 504 Program Branch, 202–205–7530, gail.hepler@sba.gov. Curtis B. Rich, Management Analyst, 202–205–7030, curtis.rich@sba.gov. SUPPLEMENTARY INFORMATION: Title: ‘‘Gulf Coast Relief Financing Pilot Information Collection.’’ Description of Respondents: Small Businesses devastated by Hurricanes Katrina and Rita. Form No.’s: 2276–Parts ABC, 2279, 2280, 2281 and 2282. Annual Responses: 8,000. Annual Burden: 8,000. Jacqueline White, Chief, Administrative Information Branch. [FR Doc. 05–23044 Filed 11–21–05; 8:45 am] BILLING CODE 8025–01–P SOCIAL SECURITY ADMINISTRATION Agency Information Collection Activities: Proposed Request, Comment Request and Correction Request The Social Security Administration (SSA) publishes a list of information 23 17 CFR 200.30–3(a)(12). VerDate Aug<31>2005 17:22 Nov 21, 2005 Jkt 208001 collection packages that will require clearance by the Office of Management and Budget (OMB) in compliance with Pub. L. 104–13, the Paperwork Reduction Act of 1995, effective October 1, 1995. The information collection packages that may be included in this notice are for new information collections, approval of existing information collections, revisions to OMB-approved information collections, and extensions (no change) of OMBapproved information collections. SSA is soliciting comments on the accuracy of the agency’s burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility, and clarity; and on ways to minimize burden on respondents, including the use of automated collection techniques or other forms of information technology. Written comments and recommendations regarding the information collection(s) should be submitted to the OMB Desk Officer and the SSA Reports Clearance Officer. The information can be mailed and/or faxed to the individuals at the addresses and fax numbers listed below: (OMB), Office of Management and Budget, Attn: Desk Officer for SSA, Fax: 202–395–6974. (SSA), Social Security Administration, DCFAM, Attn: Reports Clearance Officer, 1333 Annex Building, 6401 Security Blvd., Baltimore, MD 21235, Fax: 410–965–6400. I. The information collections listed below are pending at SSA and will be submitted to OMB within 60 days from the date of this notice. Therefore, your comments should be submitted to SSA within 60 days from the date of this publication. You can obtain copies of the collection instruments by calling the SSA Reports Clearance Officer at 410– 965–0454 or by writing to the address listed above. 1. Application for Widow’s or Widower’s Insurance Benefits—20 CFR 404.335–.338—0960–0004. SSA uses the information collected on the Form SSA– 10–BK to determine if the applicant meets the statutory and regulatory conditions for entitlement to widow(er)’s benefits. The respondents are applicants for Widow(er)’s benefits. Type of Request: Extension of an OMB-approved information collection. Number of Respondents: 288,580. Frequency of Response: 1. Average Burden per Response: 15 minutes. Estimated Annual Burden: 72,145 hours. 2. Application for Parent’s Insurance Benefits—20 CFR 404.370–404.374, 20 CFR 404.601–404.603—0960–0012. PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 Form SSA–7–F6 collects information to entitle an individual to his parent’s insurance benefits. The respondents are individuals who wish to apply to receive their parent’s insurance benefits. Type of Request: Revision of an OMBapproved information collection. Number of Respondents: 1,400. Frequency of Response: 1. Average Burden per Response: 15 minutes. Estimated Annual Burden: 350 hours. 3. Statement of Marital Relationship (by One of the Parties)—20 CFR 404.726—0960–0038. SSA uses the information collected on Form SSA– 754–F4 to determine whether the conditions for establishing a commonlaw marriage under State law are met. The respondents are applicants for spouse’s benefits. Type of Request: Extension of an OMB-approved information collection. Number of Respondents: 30,000. Frequency of Response: 1. Average Burden per Response: 30 minutes. Estimated Annual Burden: 15,000 hours. 4. Medical Source Statement of Ability To Do Work Related Activities (Physical and Mental)—20 CFR 404.1512–404.1514, 404.912–404.914, 404.1517, 416.917, 404.1519–404.1520, 416.919–416.920, 404.946, 416.946— 0960–0662. The HA–1151 and HA–1152 are used to collect data that is required to determine the residual functional capacity (RFC) of individuals who are appealing denied claims for benefits based on disability. RFC must be determined to decide cases that cannot be decided based on current work activity or on medical facts alone. The respondents are medical sources who are paid by SSA to provide reports based either on existing medical evidence or on consultative examinations conducted for the purposes of the report. Type of Request: Revision of an OMBapproved information collection. Number of Respondents: 10,000. Frequency of Response: 20. Average Burden per Response: 15 minutes. Estimated Annual Burden: 50,000 hours. 5. SSI-Quality Review Case analysis— 0960–0133. The form SSA–8508 is used in a personal interview with a sample of Supplemental Security Income (SSI) recipients and covers all elements of SSI eligibility. The information is used to assess the effectiveness of SSI policies and procedures and to determine payment accuracy rates. The respondents are SSI recipients. Type of Request: Extension of an OMB-approved information collection. E:\FR\FM\22NON1.SGM 22NON1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 70, Number 224 (Tuesday, November 22, 2005)]
[Notices]
[Pages 70648-70650]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-6409]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52774; File No. SR-NSX-2005-07]


Self-Regulatory Organizations; National Stock Exchange; Order 
Approving Proposed Rule Change, and Amendment Nos. 1, 2, and 3, 
Thereto, Relating to the Creation of a Regulatory Oversight Committee

November 15, 2005.

I. Introduction

    On August 1, 2005, the National Stock Exchange ^SM 
(``NSX'' ^SM or ``Exchange'') filed with the Securities and 
Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to create a Regulatory Oversight 
Committee (``ROC''). Notice of the proposed rule change, as amended, 
was published for comment in the Federal Register on October 14, 
2005.\3\ No comments were received regarding the proposal. This order 
approves the proposed rule change, as amended.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 52573 (October 7, 
2005), 70 FR 60113 (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    NSX proposes to amend the text of Article VI, Section 1.1 of the 
Exchange's By-Laws to allow it to create, and specifically identify, a 
ROC that would be subject to the control and supervision of NSX's Board 
of Directors (``NSX Board''). The NSX also proposes to establish a 
Regulatory Oversight Committee Charter (``ROC Charter'') that would set 
forth the functions, scope of responsibilities and composition of the 
ROC.
    NSX filed the proposed rule change in accordance with undertakings 
made by it and as set forth in Section III.F.1. of the Order 
Instituting Administrative and Cease-And-Desist Proceedings Pursuant to 
Sections 19(b) and 21C of the Securities Exchange Act of 1934, Making 
Findings, and Imposing Sanctions entered May 19, 2005.\4\ In its 
filing, NSX represented that the ROC Charter would include provisions 
that mirror the terms of its undertaking to the Commission and 
certification procedures that are consistent with the certification 
procedures contained in the Order.\5\
---------------------------------------------------------------------------

    \4\ See In the Matter of National Stock Exchange and David 
Colker, Securities Exchange Act Release No. 51715 (May 19, 2005) 
(``Administrative Order'') at Section III.F.1.
    \5\ See Notice.
---------------------------------------------------------------------------

    Pursuant to the ROC Charter, the ROC shall be responsible for 
overseeing all of NSX's regulatory functions and responsibilities and 
to advise regularly NSX's Board about NSX's regulatory matters.\6\ 
Specifically, the ROC shall: \7\ (i) Oversee NSX's regulatory functions 
to enforce compliance with the federal securities laws and NSX rules, 
including monitoring the design, implementation, and effectiveness of 
NSX's regulatory programs; (ii) recommend to the NSX Board an adequate 
operating budget for NSX's regulatory functions; (iii) approve the 
promulgation, filing, or issuance of new rules, rule amendments, rule 
interpretations, and regulatory circulars; (iv) take any other action 
necessary to fulfill its oversight and advisory responsibilities; and 
(v) adopt policies and procedures to ensure the independence of NSX's 
Chief Regulatory Officer (the ``CRO''). The ROC shall also:
---------------------------------------------------------------------------

    \6\ Proposed ROC Charter.
    \7\ Proposed ROC Charter, Section A.
---------------------------------------------------------------------------

     Be authorized to retain, at NSX's expense, outside counsel 
and consultants as it deems appropriate to carry out its 
responsibilities; \8\
---------------------------------------------------------------------------

    \8\ Proposed ROC Charter, Section B.
---------------------------------------------------------------------------

     On at least an annual basis, report to the NSX Board on 
the state of the Exchange's regulatory program; and \9\
---------------------------------------------------------------------------

    \9\ Proposed ROC Charter, Section C.
---------------------------------------------------------------------------

     Create and maintain complete minutes of all of its 
meetings, and create and maintain records reflecting the ROC's 
recommendations or proposals made to NSX Board, and NSX Board's 
decision as to each such recommendation proposal.\10\
---------------------------------------------------------------------------

    \10\ Proposed ROC Charter, Section D.
---------------------------------------------------------------------------

    In the event that the ROC's recommended operating budget for NSX's 
regulatory functions either: (1) Is less than the previous year's 
budget by a material amount, (2) is rejected by the NSX Board, (3) is 
reduced by the NSX Board by a material amount, or (4) is altered by the 
NSX Board in a manner that, in the judgment of the ROC, materially 
impairs the ability of NSX to meet its regulatory obligations, then NSX 
shall, within fifteen (15) business

[[Page 70649]]

days of such NSX Board action, notify the Director of the Commission's 
Division of Market Regulation in writing, providing copies of all 
minutes and other records reflecting the ROC's budget proposal and the 
NSX Board's decision regarding such proposal.\11\
---------------------------------------------------------------------------

    \11\ Proposed ROC Charter, Section E.
---------------------------------------------------------------------------

    The CRO shall certify compliance with the required items of the 
Administrative Order to the ROC on a form and frequency basis set by 
the ROC, and shall have the authority to require such additional 
compliance certification from the staff as he deems appropriate and in 
such forms as he may prescribe.\12\
---------------------------------------------------------------------------

    \12\ Proposed ROC Charter, Section A.
---------------------------------------------------------------------------

    In accordance with the functions and responsibilities set forth 
above, the ROC shall perform certain oversight functions with respect 
to the CRO and other regulatory personnel. Specifically, NSX 
represented in its filing that the ROC shall: \13\
---------------------------------------------------------------------------

    \13\ See Notice.
---------------------------------------------------------------------------

     Review with the Exchange's CRO and other appropriate 
regulatory personnel various aspects of the design, implementation, and 
effectiveness of NSX's regulatory programs;
     Review, revise, or approve the CRO's recommendation for a 
regulatory budget to formulate the ROC's recommendation of an adequate 
operating budget and staffing level for NSX's regulatory function to 
the Board;
     Review, evaluate, and, if appropriate, recommend to the 
Board the implementation of any and all actions recommended by the CRO 
and the Regulatory Services Division (``NSX Regulatory Division'') to 
fulfill the NSX Regulatory Division's and the ROC's oversight and 
advisory responsibilities;
     Assess the performance of the CRO and review the CRO's 
assessment of the NSX Regulatory Division's staff in fulfilling their 
responsibilities and recommend compensation and personnel actions to 
the NSX Board; and
     Review, amend, approve or reject the CRO's recommendations 
respecting the promulgation, filing, or issuance of new rules, rule 
amendments, rule interpretations, and regulatory circulars, including 
the approval (or ratification) of all regulatory circulars issued by 
the NSX within thirty five days of the issuance of such regulatory 
circulars.
    In addition, NSX represented that, on at least an annual basis, the 
ROC will review the structural protections that separate NSX's 
regulatory function from its commercial interests by reviewing the 
supervisory responsibilities of its Chief Executive Officer (``CEO'') 
and CRO. Further, the ROC will take all steps necessary to provide 
reasonable assurance that NSX is and remains in compliance with the 
Administrative Order and will take any other action necessary to 
fulfill its oversight and advisory responsibilities.\14\
---------------------------------------------------------------------------

    \14\ Id.
---------------------------------------------------------------------------

    The ROC shall be comprised of no less than three members, who have 
been appointed by NSX's Chairman with the approval of the NSX Board in 
a composition consistent with federal securities laws and NSX's By-Laws 
and Rules. At a minimum, the ROC members shall not be, nor have been 
during the preceding three years, employees of NSX or any NSX member 
firm. The ROC shall elect a Chairperson from among its members.\15\
---------------------------------------------------------------------------

    \15\ Proposed ROC Charter.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    The Commission has reviewed the proposed rule change, as amended, 
and finds that it is consistent with the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\16\ Specifically, the Commission finds that the proposed rule 
change, as amended, furthers the objectives of Section 6(b)(1) \17\ of 
the Act, which requires the Exchange to be so organized and have the 
capacity to be able to carry out the purposes of the Act and to comply, 
and to enforce compliance by its members, with the Act and the rules of 
the Exchange. In addition, the Commission finds that the proposed rule 
change, as amended, is consistent with Section 6(b)(5) of the Act,\18\ 
which requires, among other things, that the rules of a national 
securities exchange be designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \16\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \17\ 15 U.S.C. 78f(b)(1).
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    An exchange's governance structure should be designed to assure 
that its regulatory function is strong, vigorous, and sufficiently 
independent and insulated from improper influence from management or 
any regulated entity. In the Commission's view, the proposal is 
designed to advance this goal. The proposed amendments provide for a 
ROC which will be composed of members that shall not be, nor have been 
during the preceding three years, employees of NSX or any NSX member 
firm. The ROC will be responsible for oversight of all of NSX's 
regulatory functions and responsibilities, including, among other 
things, approving new NSX rules and adopting policies and procedures to 
ensure the independence of the NSX's CRO. Also, the ROC will review, on 
at least an annual basis, the structural protections that separate 
NSX's regulatory function from its commercial interests by reviewing 
the supervisory responsibilities of NSX's CEO and CRO.\19\ The 
Commission believes that these proposed amendments to the NSX's 
governance structure will add a degree of independence that should 
serve to insulate NSX's regulatory activity from its economic 
interests. As noted above, the Commission notes that NSX filed the 
proposed rule change in accordance with its undertakings as set forth 
in the Administrative Order, and represented that the proposed rule 
change includes provisions that mirror the terms of the undertaking. 
The Commission believes that in this context, the Exchange's proposal 
is consistent with the statutory requirements under Section 6(b)(1) of 
the Act.\20\ The Commission notes that it is in the process of 
reviewing a range of governance issues relating to self-regulatory 
organizations (``SROs''), including possible steps to strengthen the 
framework for the governance of SROs and ways to improve the 
transparency of the governance procedures for all SROs, and has 
proposed rules in furtherance of this goal, including proposed rules 
relating to an exchange's ROC.\21\ Depending on the results of the 
proposed rules, NSX may be required to make further changes to 
strengthen its governance structure and ensure that its ROC continues 
to comply with federal securities laws.
---------------------------------------------------------------------------

    \19\ See supra note 14 and accompanying text.
    \20\ 15 U.S.C. 78f(b)(1).
    \21\ See Securities Exchange Act Release No. 50699 (November 18, 
2004), 69 FR 71126 (December 8, 2004).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\22\ that the proposed rule change (File No. SR-NSX-2005-07) and 
Amendment Nos. 1, 2, and 3, thereto be, and hereby are, approved.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78s(b)(2).


[[Page 70650]]


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

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\23\
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jonathan G. Katz,
Secretary.
[FR Doc. E5-6409 Filed 11-21-05; 8:45 am]
BILLING CODE 8010-01-P

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