Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Order Approving and Declaring Effective a Plan for the Allocation of Regulatory Responsibilities Between the International Securities Exchange, LLC and the National Association of Securities Dealers, Inc., 9983-9985 [E7-3837]
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Federal Register / Vol. 72, No. 43 / Tuesday, March 6, 2007 / Notices
The NRC staff denied the Petitioner’s
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Dated at Rockville, Maryland, this 24th day
of February 2007.
For the Nuclear Regulatory Commission.
J.E. Dyer,
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Regulation.
[FR Doc. E7–3827 Filed 3–5–07; 8:45 am]
BILLING CODE 7590–01–P
POSTAL SERVICE
United States Postal Service Board of
Governors; Sunshine Act Meeting
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Board Votes To Close February 27, 2007
Meeting
By telephone vote on February 27,
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VerDate Aug<31>2005
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Jkt 211001
Secretary of the Board, Wendy A.
Hocking, at (202) 268–4800.
Wendy A. Hocking,
Secretary.
[FR Doc. 07–1066 Filed 3–2–07; 1:58 pm]
BILLING CODE 7710–12–M
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55367; File No. 4–529]
Program for Allocation of Regulatory
Responsibilities Pursuant to Rule 17d–
2; Order Approving and Declaring
Effective a Plan for the Allocation of
Regulatory Responsibilities Between
the International Securities Exchange,
LLC and the National Association of
Securities Dealers, Inc.
February 27, 2007.
Notice is hereby given that the
Securities and Exchange Commission
(‘‘Commission’’) has issued an Order,
pursuant to Sections 17(d) 1 and
11A(a)(3)(B) 2 of the Securities Exchange
Act of 1934 (‘‘Act’’), granting approval
and declaring effective an amended and
restated plan for the allocation of
regulatory responsibilities (‘‘Plan’’) that
was filed pursuant to Rule 17d–2 under
the Act 3 by the International Securities
Exchange, LLC (‘‘ISE’’) and the National
Association of Securities Dealers, Inc.
(‘‘NASD’’) (together with ISE, the
‘‘Parties’’).4
Accordingly, NASD shall assume, in
addition to the regulatory responsibility
it has under the Act, the regulatory
responsibilities allocated to it under the
Plan. At the same time, ISE is relieved
of those regulatory responsibilities
allocated to NASD under the Plan.
I. Introduction
Section 19(g)(1) of the Act,5 among
other things, requires every selfregulatory organization (‘‘SRO’’)
registered as either a national securities
exchange or registered securities
association to examine for, and enforce
compliance by, its members and persons
associated with its members with the
Act, the rules and regulations
thereunder, and the SRO’s own rules,
unless the SRO is relieved of this
responsibility pursuant to Section
17(d) 6 or 19(g)(2) 7 of the Act. Section
1 15
U.S.C. 78q(d).
U.S.C. 78k–1(a)(3)(B).
3 17 CFR 240.17d–2.
4 See Securities Exchange Act Release No. 55057
(January 8, 2007), 72 FR 2040 (January 17, 2007)
(‘‘Notice’’).
5 15 U.S.C. 78s(g)(1).
6 15 U.S.C. 78q(d).
7 15 U.S.C. 78s(g)(2).
2 15
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Fmt 4703
Sfmt 4703
9983
17(d)(1) of the Act 8 was intended, in
part, to eliminate unnecessary multiple
examinations and regulatory
duplication for those broker-dealers that
maintain memberships in more than one
SRO (‘‘common members’’).9 With
respect to a common member, Section
17(d)(1) authorizes the Commission, by
rule or order, to relieve an SRO of the
responsibility to receive regulatory
reports, to examine for and enforce
compliance with applicable statutes,
rules, and regulations, or to perform
other specified regulatory functions.
To implement Section 17(d)(1), the
Commission adopted two rules: Rule
17d–1 10 and Rule 17d–2 11 under the
Act. Rule 17d–2 permits SROs to
propose joint plans for the allocation of
regulatory responsibilities, other than
financial responsibility rules, with
respect to their common members.
Under paragraph (c) of Rule 17d–2, the
Commission may declare such a plan
effective if, after providing for notice
and comment, it determines that the
plan is necessary or appropriate in the
public interest and for the protection of
investors, to foster cooperation and
coordination among the SROs, to
remove impediments to, and foster the
development of, a national market
system and a national clearance and
settlement system, and is in conformity
with the factors set forth in Section
17(d) of the Act. Upon effectiveness of
a plan filed pursuant to Rule 17d–2, an
SRO is relieved of those regulatory
responsibilities for common members
that are allocated by the plan to another
SRO.
On January 17, 2007, the Commission
published notice of the Plan filed by ISE
and NASD.12 The Commission received
no comments on the Plan. The Plan is
intended to replace and supersede the
current 17d–2 plan between NASD and
ISE and all prior amendments thereto in
their entirety,13 and is intended to
8 15
U.S.C. 78q(d)(1).
Securities Act Amendments of 1975, Report
of the Senate Committee on Banking, Housing, and
Urban Affairs to Accompany S. 249, S. Rep. No. 94–
75, 94th Cong., 1st Session 32 (1975).
10 17 CFR 240.17d–1. Rule 17d–1 authorizes the
Commission to name a single SRO as the designated
examining authority (‘‘DEA’’) to examine common
members for compliance with the financial
responsibility requirements imposed by the Act, or
by Commission or SRO rules.
11 17 CFR 240.17d–2.
12 See Notice, supra note 4.
13 The Parties currently operate pursuant to a
17d–2 plan in which NASD has assumed certain
inspection, examination, and enforcement
responsibility for common members with respect to
certain applicable laws, rules, and regulations (the
‘‘current NASD–ISE 17d–2 plan’’). See Securities
Exchange Act Release Nos. 42668 (April 11, 2000),
65 FR 21048 (April 19, 2000) (File No. 4–431)
9 See
E:\FR\FM\06MRN1.SGM
Continued
06MRN1
9984
Federal Register / Vol. 72, No. 43 / Tuesday, March 6, 2007 / Notices
reduce regulatory duplication for firms
that are common members of ISE and
NASD. The text of the Plan allocates
regulatory responsibilities among the
Parties with respect to common
members. Included in the Plan is an
attachment (the ‘‘ISE Certification of
Common Rules,’’ referred to herein as
the ‘‘Certification’’) that lists every ISE
rule and federal securities law and rule
and regulation thereunder for which,
under the Plan, NASD would bear
responsibility for examining, and
enforcing compliance by, common
members.
cprice-sewell on PROD1PC67 with NOTICES
II. Discussion
The Commission finds that the
proposed Plan is consistent with the
factors set forth in Section 17(d) of the
Act 14 and Rule 17d–2(c) thereunder 15
in that the proposed Plan is necessary
or appropriate in the public interest and
for the protection of investors, fosters
cooperation and coordination among
SROs, and removes impediments to and
fosters the development of the national
market system. In particular, the
Commission believes that the proposed
Plan could reduce unnecessary
regulatory duplication by allocating to
NASD certain responsibilities for
common members that would otherwise
be performed by both ISE and NASD.
Accordingly, the proposed Plan
promotes efficiency by reducing costs to
common members. Furthermore,
because ISE and NASD will coordinate
their regulatory functions in accordance
with the Plan, the Plan should promote
investor protection.
The Commission notes that, under the
Plan, ISE and NASD have allocated
regulatory responsibility for all ISE rules
that are substantially similar to NASD
rules in that ISE’s rule would not
require NASD to develop one or more
new examination standards, modules,
procedures, or criteria in order to
analyze the application of the rule, or a
dual member’s activity, conduct, or
output in relation to such rule
(‘‘Common Rules’’). These Common
Rules are specifically listed in the
Certification. In addition, under the
Plan, the NASD would assume
regulatory responsibility for any
provisions of the federal securities laws
and the rules and regulations
thereunder that are set forth in the
Certification.16
(notice of filing); 42815 (May 23, 2000), 65 FR
34762 (May 31, 2000) (File No. 4–431) (approval
order).
14 15 U.S.C. 78q(d).
15 17 CFR 240.17d–2(c).
16 As proposed currently, however, there are no
federal securities rules listed on the Certification.
Therefore, at present, ISE has not been relieved of
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15:35 Mar 05, 2007
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The Plan further provides that NASD
shall not assume regulatory
responsibility, and ISE will retain full
responsibility, for: (1) Surveillance and
enforcement with respect to trading
activities or practices involving ISE’s
own marketplace; (2) registration
pursuant to ISE’s applicable rules of
associated persons (i.e., registration
rules that are not Common Rules); (3)
ISE’s duties as a DEA under Rule 17d–
1 of the Act;17 and (4) any rules of ISE
that do not qualify as Common Rules,
except that NASD shall be responsible
for such rules with respect to any ISE
member that operates as a facility, acts
as an outbound router for ISE, and is a
member of NASD (‘‘Router Member’’).18
Apparent violations of any ISE rules by
any Router Member will be processed
by NASD, and NASD will conduct any
enforcement proceedings. The effect of
these provisions is that regulatory
oversight and enforcement
responsibilities for any Router Member
will be vested with NASD. These
provisions should help avoid any
potential conflicts of interest that could
arise if ISE was primarily responsible
for regulating its affiliated outbound
router.19
According to the Plan, ISE will
perform a review of the Certification, at
least annually, or more frequently if
required by changes in either the rules
of ISE or NASD, to add ISE rules not
included on the then-current list of
Common Rules that are substantially
similar to NASD rules (i.e., new rules
that qualify as Common Rules or
existing rules that have been amended
so that they now qualify as Common
Rules); delete ISE rules included in the
then-current list of Common Rules that
are no longer substantially similar to
NASD rules (i.e., amended rules that
cease to be Common Rules); and
confirm that the remaining rules on the
list of Common Rules continue to be ISE
rules that are substantially similar to
NASD rules. NASD will then confirm in
writing whether the rules listed in any
updated list are Common Rules as
defined in the Plan. Under the Plan, ISE
any regulatory responsibilities, pursuant to the
Plan, for any provisions of the federal securities
laws and the rules and regulations thereunder.
17 17 CFR 240.17d–1.
18 Currently, ISE Route LLC is the only Router
Member.
19 In a separate proposed rule change relating to
the adoption of rules to govern its electronic trading
system for equities, ISE represented that it would
enter into a 17d–2 agreement with NASD to
delegate to NASD all regulatory oversight and
enforcement responsibilities with respect to the
ISE’s outbound routing facility pursuant to
applicable laws (i.e., the Plan). See Securities
Exchange Act Release No. 54528 (September 28,
2006), 71 FR 58650, 58654 (October 4, 2006) (SR–
ISE–2006–48).
PO 00000
Frm 00067
Fmt 4703
Sfmt 4703
will also provide NASD with a current
list of dual members and shall update
the list no less frequently than once
each quarter.
The Commission is hereby declaring
effective and approving a plan that,
among other things, allocates regulatory
responsibility to NASD for the oversight
and enforcement of all ISE rules that are
substantially similar to the rules of
NASD for common members of ISE and
NASD. Therefore, modifications to the
Certification need not be filed with the
Commission as an amendment to the
Plan, provided that the Parties are only
adding to, deleting from, or confirming
changes to ISE rules in the Certification
in conformance with the definition of
Common Rules provided in the Plan.
However, should ISE or NASD decide to
add an ISE rule to the Certification that
is not substantially similar to an NASD
rule; delete an ISE rule from the
Certification that is substantially similar
to an NASD rule; or leave on the
Certification an ISE rule that is no
longer substantially similar to an NASD
rule, then such a change would
constitute an amendment to the Plan,
which must be filed with the
Commission pursuant to Rule 17d–2
under the Act and noticed for public
comment.20
The Plan also permits ISE and NASD
to terminate the Plan, subject to notice,
for various reasons. The Commission
notes, however, that while the Plan
permits the Parties to terminate the
Plan, the Parties cannot by themselves
reallocate the regulatory responsibilities
set forth in the Plan, since Rule 17d–2
under the Act requires that any
allocation or re-allocation of regulatory
responsibilities be filed with the
Commission.21
III. Conclusion
This Order gives effect to the Plan
filed with the Commission in File No.
4–529. The Parties shall notify all
members affected by the Plan of their
rights and obligations under the Plan.
It is therefore ordered, pursuant to
Sections 17(d) and 11A(a)(3)(B) of the
Act, that the Plan in File No. 4–529,
between ISE and NASD, filed pursuant
to Rule 17d–2 under the Act, is
approved and declared effective.
20 The Commission also notes that the addition to
(or eventual deletion from) the Certification of any
federal securities laws, rules, and regulations for
which NASD would bear responsibility under the
Plan for examining, and enforcing compliance by,
common members, would constitute an amendment
to the Plan.
21 The Commission notes that paragraphs 4 and
13 of the Plan reflect the fact that NASD’s
responsibilities under the Plan will continue in
effect until the Commission approves the
termination of the Plan.
E:\FR\FM\06MRN1.SGM
06MRN1
Federal Register / Vol. 72, No. 43 / Tuesday, March 6, 2007 / Notices
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.22
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–3837 Filed 3–5–07; 8:45 am]
reports of an execution involving an
incorrect security, incorrect side of the
market, incorrect price or whether an
execution actually took place, to be
treated as an erroneous trade.
The text of the proposed rule change
appears below. Proposed new language
is italicized; proposed deletions are in
[brackets].5
*
*
*
*
*
BILLING CODE 8010–01–P
Rule 134.
It is therefore ordered that ISE is
relieved of those responsibilities
allocated to the NASD under the Plan in
File No. 4–529.
Differences and Omissions-Cleared
Transactions
SECURITIES AND EXCHANGE
COMMISSION
(‘‘QTs’’)
[Release No. 34–55361; File No. SR–NYSE–
2006–28]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of a Proposed Rule Change as
Modified by Amendment No. 2 Thereto
Relating to NYSE Rules 134 and 411
February 27, 2007.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 2,
2006, the New York Stock Exchange
LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been substantially prepared by
NYSE. NYSE filed Amendment No. 1 to
the proposed rule change on September
22, 2006.3 NYSE filed Amendment No.
2 to the proposed rule change on
February 20, 2007.4 The Commission is
publishing this notice to solicit
comments on the proposed rule change,
as amended, from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
cprice-sewell on PROD1PC67 with NOTICES
The proposed rule change consists of
amendments to NYSE Rules 134
(Differences and Omissions-Cleared
Transactions) and 411 (Erroneous
Reports). The proposed amendments
seek to incorporate recognized trading
errors into NYSE Rule 134. The
Exchange further seeks to expand the
use of the Floor broker’s error account
to include certain situations involving
‘‘not held’’ orders. Furthermore, the
proposed rule change would amend
NYSE Rule 411 to allow erroneous
22 17
CFR 200.30–3(a)(34).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Amendment No. 1 supersedes the original filing
in its entirety.
4 Amendment No. 2 supersedes Amendment No.
1 in its entirety.
1 15
VerDate Aug<31>2005
15:35 Mar 05, 2007
Jkt 211001
*
*
*
*
*
(d)
*
*
*
*
*
(iii) Records as to all errors shall be
contemporaneous to the error and be
maintained by the member or his or her
member organization. Such records
shall include the audit trail data
elements prescribed in Rule 132, as well
as the nature and amount of the error,
the means whereby the member
resolved the error with the member or
member organization that cleared the
error trade on the member’s behalf, the
aggregate amount of liability that the
member has incurred and has
outstanding, as of the time each such
error trade entry is recorded, and such
other information as the Exchange may
from time to time require.
*
*
*
*
*
(g) For the purposes of this rule an
‘‘error’’ occurs as described in this
subsection (g) and (h) below. When an
order is executed outside of the
customer instructions as entered in the
electronic order tracking system of the
Exchange pursuant to Rule 123(e). This
includes, but is not limited to:
(i) When a held or a not held order is
executed in:
(a) The wrong security; or
(b) on the wrong side of the market;
or
(c) at a price outside the limit price
of the order; or
(d) is over bought or over sold; or
(e) duplicates an execution.
(ii) When an error is committed in the
execution of a not held order as it
relates to symbol, side, or price as noted
in (i) above, which causes such not held
order to remain unexecuted.
5 The Exchange inadvertently failed to identify
the numbering of Rule 134(g)(i) and (ii) as proposed
new text. For clarity, this numbering has been
italicized herein. The Exchange has committed to
file an amendment reflecting the fact that this
section numbering is new text prior to Commission
approval of the proposed rule change. Telephone
conversation between Deanna Logan, Director,
Office of the General Counsel, NYSE and David
Michehl, Special Counsel, Commission, Division of
Market Regulation, on February 21, 2007.
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Frm 00068
Fmt 4703
Sfmt 4703
9985
(h) When: (i) There is a failure to
execute a held order when market
conditions permitted; or (ii) when a not
held order remains unexecuted, in
whole or in part, due to the order being
lost or misplaced, or as a result of a
system malfunction.
(i) The Floor broker must maintain a
signed, time-stamped record, including
supporting documentation of such error.
(j)(i) For the types of errors referred to
in (h)(ii) above, such record and
supporting documents must be provided
to the Exchange Division of Market
Surveillance prior to the opening of the
Floor on the next trade date following
the error.
(ii) With respect to the errors
described in (h)(ii) above, the Floor
broker may execute the order in
alignment with half the volume of each
Exchange tape print up to the size of the
order between the time that the order
was entered and the time that the Floor
Broker realized that the order was lost,
misplaced or not executed as a result of
a system malfunction. If executing half
the volume of an order based on the
Exchange tape print would result in
more than a unit of trading, but not a
multiple thereof (such as 150 shares),
the customer would be entitled to the
nearest full unit of shares rounded
down (such as 100 shares).
(iii) If the Floor broker fails to provide
sufficient documentation, (which must
include, but is not limited to, the date
and time of the error, the date and time
the error was discovered, the size of the
error, the stock in which the error
occurred, the original instructions, the
names of all involved parties including
the client and any upstairs trader, a
detailed narrative of how the error
occurred, detail narrative of discussions
with relevant parties, the steps taken to
correct the error and the ultimate
resolution of the error) prior to the next
trade date following the error, the Floor
broker is prohibited from relying on the
provisions of (j)(ii) above.
*
*
*
*
*
Rule 411.
Erroneous Reports
(a)
*
*
*
*
*
(iii) Except as provided in (iv) below,
[A] a report shall not be binding and
must be rescinded if an order was not
actually executed but was in error
reported to have been executed; an
order which was executed, but in error
reported as not executed, shall be
binding; provided, however, when a
member who is on the Floor reports in
good faith the execution of an order
entrusted to him by another member or
E:\FR\FM\06MRN1.SGM
06MRN1
]]>Agencies
[Federal Register Volume 72, Number 43 (Tuesday, March 6, 2007)]
[Notices]
[Pages 9983-9985]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-3837]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55367; File No. 4-529]
Program for Allocation of Regulatory Responsibilities Pursuant to
Rule 17d-2; Order Approving and Declaring Effective a Plan for the
Allocation of Regulatory Responsibilities Between the International
Securities Exchange, LLC and the National Association of Securities
Dealers, Inc.
February 27, 2007.
Notice is hereby given that the Securities and Exchange Commission
(``Commission'') has issued an Order, pursuant to Sections 17(d) \1\
and 11A(a)(3)(B) \2\ of the Securities Exchange Act of 1934 (``Act''),
granting approval and declaring effective an amended and restated plan
for the allocation of regulatory responsibilities (``Plan'') that was
filed pursuant to Rule 17d-2 under the Act \3\ by the International
Securities Exchange, LLC (``ISE'') and the National Association of
Securities Dealers, Inc. (``NASD'') (together with ISE, the
``Parties'').\4\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78q(d).
\2\ 15 U.S.C. 78k-1(a)(3)(B).
\3\ 17 CFR 240.17d-2.
\4\ See Securities Exchange Act Release No. 55057 (January 8,
2007), 72 FR 2040 (January 17, 2007) (``Notice'').
---------------------------------------------------------------------------
Accordingly, NASD shall assume, in addition to the regulatory
responsibility it has under the Act, the regulatory responsibilities
allocated to it under the Plan. At the same time, ISE is relieved of
those regulatory responsibilities allocated to NASD under the Plan.
I. Introduction
Section 19(g)(1) of the Act,\5\ among other things, requires every
self-regulatory organization (``SRO'') registered as either a national
securities exchange or registered securities association to examine
for, and enforce compliance by, its members and persons associated with
its members with the Act, the rules and regulations thereunder, and the
SRO's own rules, unless the SRO is relieved of this responsibility
pursuant to Section 17(d) \6\ or 19(g)(2) \7\ of the Act. Section
17(d)(1) of the Act \8\ was intended, in part, to eliminate unnecessary
multiple examinations and regulatory duplication for those broker-
dealers that maintain memberships in more than one SRO (``common
members'').\9\ With respect to a common member, Section 17(d)(1)
authorizes the Commission, by rule or order, to relieve an SRO of the
responsibility to receive regulatory reports, to examine for and
enforce compliance with applicable statutes, rules, and regulations, or
to perform other specified regulatory functions.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78s(g)(1).
\6\ 15 U.S.C. 78q(d).
\7\ 15 U.S.C. 78s(g)(2).
\8\ 15 U.S.C. 78q(d)(1).
\9\ See Securities Act Amendments of 1975, Report of the Senate
Committee on Banking, Housing, and Urban Affairs to Accompany S.
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
---------------------------------------------------------------------------
To implement Section 17(d)(1), the Commission adopted two rules:
Rule 17d-1 \10\ and Rule 17d-2 \11\ under the Act. Rule 17d-2 permits
SROs to propose joint plans for the allocation of regulatory
responsibilities, other than financial responsibility rules, with
respect to their common members. Under paragraph (c) of Rule 17d-2, the
Commission may declare such a plan effective if, after providing for
notice and comment, it determines that the plan is necessary or
appropriate in the public interest and for the protection of investors,
to foster cooperation and coordination among the SROs, to remove
impediments to, and foster the development of, a national market system
and a national clearance and settlement system, and is in conformity
with the factors set forth in Section 17(d) of the Act. Upon
effectiveness of a plan filed pursuant to Rule 17d-2, an SRO is
relieved of those regulatory responsibilities for common members that
are allocated by the plan to another SRO.
---------------------------------------------------------------------------
\10\ 17 CFR 240.17d-1. Rule 17d-1 authorizes the Commission to
name a single SRO as the designated examining authority (``DEA'') to
examine common members for compliance with the financial
responsibility requirements imposed by the Act, or by Commission or
SRO rules.
\11\ 17 CFR 240.17d-2.
---------------------------------------------------------------------------
On January 17, 2007, the Commission published notice of the Plan
filed by ISE and NASD.\12\ The Commission received no comments on the
Plan. The Plan is intended to replace and supersede the current 17d-2
plan between NASD and ISE and all prior amendments thereto in their
entirety,\13\ and is intended to
[[Page 9984]]
reduce regulatory duplication for firms that are common members of ISE
and NASD. The text of the Plan allocates regulatory responsibilities
among the Parties with respect to common members. Included in the Plan
is an attachment (the ``ISE Certification of Common Rules,'' referred
to herein as the ``Certification'') that lists every ISE rule and
federal securities law and rule and regulation thereunder for which,
under the Plan, NASD would bear responsibility for examining, and
enforcing compliance by, common members.
---------------------------------------------------------------------------
\12\ See Notice, supra note 4.
\13\ The Parties currently operate pursuant to a 17d-2 plan in
which NASD has assumed certain inspection, examination, and
enforcement responsibility for common members with respect to
certain applicable laws, rules, and regulations (the ``current NASD-
ISE 17d-2 plan''). See Securities Exchange Act Release Nos. 42668
(April 11, 2000), 65 FR 21048 (April 19, 2000) (File No. 4-431)
(notice of filing); 42815 (May 23, 2000), 65 FR 34762 (May 31, 2000)
(File No. 4-431) (approval order).
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II. Discussion
The Commission finds that the proposed Plan is consistent with the
factors set forth in Section 17(d) of the Act \14\ and Rule 17d-2(c)
thereunder \15\ in that the proposed Plan is necessary or appropriate
in the public interest and for the protection of investors, fosters
cooperation and coordination among SROs, and removes impediments to and
fosters the development of the national market system. In particular,
the Commission believes that the proposed Plan could reduce unnecessary
regulatory duplication by allocating to NASD certain responsibilities
for common members that would otherwise be performed by both ISE and
NASD. Accordingly, the proposed Plan promotes efficiency by reducing
costs to common members. Furthermore, because ISE and NASD will
coordinate their regulatory functions in accordance with the Plan, the
Plan should promote investor protection.
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\14\ 15 U.S.C. 78q(d).
\15\ 17 CFR 240.17d-2(c).
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The Commission notes that, under the Plan, ISE and NASD have
allocated regulatory responsibility for all ISE rules that are
substantially similar to NASD rules in that ISE's rule would not
require NASD to develop one or more new examination standards, modules,
procedures, or criteria in order to analyze the application of the
rule, or a dual member's activity, conduct, or output in relation to
such rule (``Common Rules''). These Common Rules are specifically
listed in the Certification. In addition, under the Plan, the NASD
would assume regulatory responsibility for any provisions of the
federal securities laws and the rules and regulations thereunder that
are set forth in the Certification.\16\
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\16\ As proposed currently, however, there are no federal
securities rules listed on the Certification. Therefore, at present,
ISE has not been relieved of any regulatory responsibilities,
pursuant to the Plan, for any provisions of the federal securities
laws and the rules and regulations thereunder.
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The Plan further provides that NASD shall not assume regulatory
responsibility, and ISE will retain full responsibility, for: (1)
Surveillance and enforcement with respect to trading activities or
practices involving ISE's own marketplace; (2) registration pursuant to
ISE's applicable rules of associated persons (i.e., registration rules
that are not Common Rules); (3) ISE's duties as a DEA under Rule 17d-1
of the Act;\17\ and (4) any rules of ISE that do not qualify as Common
Rules, except that NASD shall be responsible for such rules with
respect to any ISE member that operates as a facility, acts as an
outbound router for ISE, and is a member of NASD (``Router
Member'').\18\ Apparent violations of any ISE rules by any Router
Member will be processed by NASD, and NASD will conduct any enforcement
proceedings. The effect of these provisions is that regulatory
oversight and enforcement responsibilities for any Router Member will
be vested with NASD. These provisions should help avoid any potential
conflicts of interest that could arise if ISE was primarily responsible
for regulating its affiliated outbound router.\19\
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\17\ 17 CFR 240.17d-1.
\18\ Currently, ISE Route LLC is the only Router Member.
\19\ In a separate proposed rule change relating to the adoption
of rules to govern its electronic trading system for equities, ISE
represented that it would enter into a 17d-2 agreement with NASD to
delegate to NASD all regulatory oversight and enforcement
responsibilities with respect to the ISE's outbound routing facility
pursuant to applicable laws (i.e., the Plan). See Securities
Exchange Act Release No. 54528 (September 28, 2006), 71 FR 58650,
58654 (October 4, 2006) (SR-ISE-2006-48).
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According to the Plan, ISE will perform a review of the
Certification, at least annually, or more frequently if required by
changes in either the rules of ISE or NASD, to add ISE rules not
included on the then-current list of Common Rules that are
substantially similar to NASD rules (i.e., new rules that qualify as
Common Rules or existing rules that have been amended so that they now
qualify as Common Rules); delete ISE rules included in the then-current
list of Common Rules that are no longer substantially similar to NASD
rules (i.e., amended rules that cease to be Common Rules); and confirm
that the remaining rules on the list of Common Rules continue to be ISE
rules that are substantially similar to NASD rules. NASD will then
confirm in writing whether the rules listed in any updated list are
Common Rules as defined in the Plan. Under the Plan, ISE will also
provide NASD with a current list of dual members and shall update the
list no less frequently than once each quarter.
The Commission is hereby declaring effective and approving a plan
that, among other things, allocates regulatory responsibility to NASD
for the oversight and enforcement of all ISE rules that are
substantially similar to the rules of NASD for common members of ISE
and NASD. Therefore, modifications to the Certification need not be
filed with the Commission as an amendment to the Plan, provided that
the Parties are only adding to, deleting from, or confirming changes to
ISE rules in the Certification in conformance with the definition of
Common Rules provided in the Plan. However, should ISE or NASD decide
to add an ISE rule to the Certification that is not substantially
similar to an NASD rule; delete an ISE rule from the Certification that
is substantially similar to an NASD rule; or leave on the Certification
an ISE rule that is no longer substantially similar to an NASD rule,
then such a change would constitute an amendment to the Plan, which
must be filed with the Commission pursuant to Rule 17d-2 under the Act
and noticed for public comment.\20\
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\20\ The Commission also notes that the addition to (or eventual
deletion from) the Certification of any federal securities laws,
rules, and regulations for which NASD would bear responsibility
under the Plan for examining, and enforcing compliance by, common
members, would constitute an amendment to the Plan.
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The Plan also permits ISE and NASD to terminate the Plan, subject
to notice, for various reasons. The Commission notes, however, that
while the Plan permits the Parties to terminate the Plan, the Parties
cannot by themselves reallocate the regulatory responsibilities set
forth in the Plan, since Rule 17d-2 under the Act requires that any
allocation or re-allocation of regulatory responsibilities be filed
with the Commission.\21\
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\21\ The Commission notes that paragraphs 4 and 13 of the Plan
reflect the fact that NASD's responsibilities under the Plan will
continue in effect until the Commission approves the termination of
the Plan.
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III. Conclusion
This Order gives effect to the Plan filed with the Commission in
File No. 4-529. The Parties shall notify all members affected by the
Plan of their rights and obligations under the Plan.
It is therefore ordered, pursuant to Sections 17(d) and
11A(a)(3)(B) of the Act, that the Plan in File No. 4-529, between ISE
and NASD, filed pursuant to Rule 17d-2 under the Act, is approved and
declared effective.
[[Page 9985]]
It is therefore ordered that ISE is relieved of those
responsibilities allocated to the NASD under the Plan in File No. 4-
529.
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\22\ 17 CFR 200.30-3(a)(34).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\22\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-3837 Filed 3-5-07; 8:45 am]
BILLING CODE 8010-01-P
