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 Chicago Board Options Exchange, Incorporated and the National Association of Securities Dealers, Inc., 28087-28089 [E7-9569]

Download as PDF Federal Register / Vol. 72, No. 96 / Friday, May 18, 2007 / Notices of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Please direct your written comments to R. Corey Booth, Director/Chief Information Officer, Securities and Exchange Commission, C/O Shirley Martinson, 6432 General Green Way, Alexandria, VA 22312; or send an e-mail to: PRA_Mailbox@sec.gov. Dated: May 11, 2007. Jill M. Peterson, Assistant Secretary. [FR Doc. E7–9573 Filed 5–17–07; 8:45 am] of the burden imposed by the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Please direct your written comments to R. Corey Booth, Director/Chief Information Officer, Securities and Exchange Commission, c/o Shirley Martinson, 6432 General Green Way, Alexandria, VA 22312; or send an e-mail to: PRA_Mailbox@sec.gov. Dated: May 11, 2007. Jill M. Peterson, Assistant Secretary. [FR Doc. E7–9574 Filed 5–17–07; 8:45 am] BILLING CODE 8010–01–P BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION SECURITIES AND EXCHANGE COMMISSION pwalker on PROD1PC71 with NOTICES Proposed Collection; Comment Request [Release No. 34–55755; File No. 4–536] Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of Filings and Information Services, Washington, DC 20549. Extension: Form 15; OMB Control No. 3235– 0167; SEC File No. 270–170. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) the Securities and Exchange Commission (‘‘Commission’’) is soliciting comments on the collection of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval. Form 15 (17 CFR 249.232) is a certification of termination of a class of security under Section 12(g) or notice of suspension of duty to file reports pursuant to Sections 13 and 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). We estimate that approximately 3,000 issuers file Form 15 annually and it takes approximately 1.5 hours per response to prepare for a total of 4,500 annual burden hours. Written comments are invited on: (a) Whether this proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency’s estimate VerDate Aug<31>2005 17:06 May 17, 2007 Jkt 211001 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 Chicago Board Options Exchange, Incorporated and the National Association of Securities Dealers, Inc. May 14, 2007. Notice is hereby given that the Securities and Exchange Commission (‘‘Commission’’) has issued an Order, pursuant to Sections 17(d) and 11A(a)(3)(B) of the Securities Exchange Act of 1934 (‘‘Act’’),1 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 2 by the Chicago Board Options Exchange, Incorporated (‘‘CBOE’’) and the National Association of Securities Dealers, Inc. (‘‘NASD’’) (together with CBOE, the ‘‘Parties’’) with respect to the CBOE Stock Exchange, LLC (‘‘CBSX’’), which is a facility of CBOE featuring a fully-automated marketplace for trading of non-option securities by CBOE members.3 1 15 U.S.C. 78q(d) and 15 U.S.C. 78k–1(a)(3)(B), respectively. 2 17 CFR 240.17d–2. 3 See Securities Exchange Act Release No. 55612 (April 10, 2007), 72 FR 19556 (April 18, 2007) (‘‘Notice’’). CBOE serves as the self-regulatory authority for CBSX. PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 28087 Accordingly, NASD shall assume, in addition to the regulatory responsibility it has under the Act, the regulatory responsibilities allocated to it under the Plan as they relate to the CBSX. At the same time, CBOE is relieved of those regulatory responsibilities allocated to NASD under the Plan. I. Introduction Section 19(g)(1) of the Act,4 among other things, requires every selfregulatory organization (‘‘SRO’’) that is 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) or 19(g)(2) of the Act.5 Section 17(d)(1) of the Act 6 was intended, among other things, to eliminate unnecessary multiple examinations and regulatory duplication for those broker-dealers that maintain memberships in more than one SRO (‘‘common members’’).7 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 and Rule 17d–2 under the Act.8 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 4 15 U.S.C. 78s(g)(1). U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively. 6 15 U.S.C. 78q(d)(1). 7 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). 8 17 CFR 240.17d–1 and 17 CFR 240.17d–2, respectively. 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. 5 15 E:\FR\FM\18MYN1.SGM 18MYN1 28088 Federal Register / Vol. 72, No. 96 / Friday, May 18, 2007 / Notices 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 April 10, 2007, the Commission issued notice of the Plan filed by CBOE and NASD.9 The Commission received no comments on the Plan. The Plan is intended to reduce regulatory duplication in the examination of Dual Members 10 and in the filing and processing of certain registration and membership records as it relates to the CBSX by allocating to NASD certain examination and enforcement responsibilities with respect to CBSX. Included in the Plan is an attachment (the ‘‘CBOE Certification of Common Rules,’’ referred to herein as the ‘‘Certification’’) that lists every CBOE rule applicable to CBSX,11 and any federal securities law, rule, or regulation for which, under the Plan, NASD would bear responsibility for examining, and enforcing compliance by, common members. II. Discussion The Commission finds that the proposed Plan is consistent with the factors set forth in Section 17(d) of the Act 12 and Rule 17d–2(c) thereunder 13 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 should reduce unnecessary regulatory duplication by allocating to NASD certain responsibilities for common members that would otherwise be performed by both CBOE and NASD. Accordingly, the proposed Plan promotes efficiency by reducing costs to common members. Furthermore, because CBOE and NASD will coordinate their regulatory functions in accordance with the Plan, the Plan should promote investor protection. 9 See Notice, supra note 3. Section 1(c) of the Plan (defining Dual Member as ‘‘those CBOE members that are also members of NASD and the persons associated therewith’’). 11 As noted in the Certification, to the extent that any CBOE rule listed on the Certification makes reference to options, such rule shall be read to apply to equity securities as provided by CBOE Rule 53.6. 12 15 U.S.C. 78q(d). 13 17 CFR 240.17d–2(c). pwalker on PROD1PC71 with NOTICES 10 See VerDate Aug<31>2005 17:06 May 17, 2007 Jkt 211001 The Commission notes that, under the Plan, CBOE and NASD have allocated regulatory responsibility for those CBOE governing the operation of CBSX that are substantially similar to NASD rules in that examination for compliance with each applicable CBOE rule would not require NASD to develop one or more new examination standards, modules, procedures, or criteria to analyze the application of the rule, or a Dual Member’s activity, conduct, or output in relation to such rule (‘‘Common Rules’’). The Common Rules covered by the Plan are specifically listed in the Certification, as may be amended by the Parties from time to time.14 In addition, under the Plan, 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. The Plan further provides that NASD shall not assume regulatory responsibility, and CBOE will retain full responsibility, for: (1) Surveillance and enforcement with respect to trading activities or practices involving CBOE’s own marketplace, including without limitation CBOE’s rules relating to the rights and obligations of market makers; (2) registration pursuant to CBOE’s applicable rules of associated persons (i.e., registration rules that are not Common Rules); (3) CBOE’s duties as a DEA under Rule 17d–1 of the Act;15 and (4) any rules of CBOE that do not qualify as Common Rules. According to the Plan, CBOE will review the Certification, at least annually, or more frequently if required by changes in either the rules of CBOE or NASD, and, if necessary, submit to NASD an updated list of Common Rules to add CBOE rules not included on the then-current list of Common Rules that are substantially similar to NASD rules; delete CBOE rules included in the thencurrent list of Common Rules that are no longer substantially similar to NASD rules; and confirm that the remaining rules on the list of Common Rules continue to be CBOE rules that are substantially similar to NASD rules.16 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, CBOE will also provide NASD with a current list of dual members and shall update the list no less frequently than once each quarter.17 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 CBOE rules applicable to CBSX that are substantially similar to the rules of NASD for Dual Members of CBOE 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 CBOE rules in the Certification in conformance with the definition of Common Rules provided in the Plan. However, should the Parties decide to add a CBOE rule to the Certification that is not substantially similar to an NASD rule; delete a CBOE rule from the Certification that is substantially similar to an NASD rule; or leave on the Certification a CBOE 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.18 The Plan also permits CBOE and NASD to terminate the Plan, subject to notice. 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.19 III. Conclusion This Order gives effect to the Plan filed with the Commission in File No. 4–536. 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. 4–536, between CBOE and NASD, filed pursuant to Rule 17d–2 under the Act, is approved and declared effective. 17 See 14 CBOE has represented that, with respect to CBSX, there are no CBOE rules that are substantially similar to NASD rules that are within the scope of the Plan but not included in the Certification. See Telephone call between Richard Holley III, Special Counsel, Division of Market Regulation, Commission, and Lawrence J. Bresnahan, Vice President, Member Firm Regulation, CBOE, on May 11, 2007. 15 17 CFR 240.17d–1. 16 See Section 2 of the Plan. PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 Section 3 of the Plan. Commission also notes that the addition to or 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, Dual Members, also would constitute an amendment to the Plan. 19 The Commission notes that paragraph 13 of the Plan reflects the fact that NASD’s responsibilities under the Plan will continue in effect until the Commission approves the termination of the Plan. 18 The E:\FR\FM\18MYN1.SGM 18MYN1 Federal Register / Vol. 72, No. 96 / Friday, May 18, 2007 / Notices It is therefore ordered that CBOE is relieved of those responsibilities allocated to the NASD under the Plan in File No. 4–536. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.20 Jill M. Peterson, Assistant Secretary. [FR Doc. E7–9569 Filed 5–17–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55756; File No. SR–Amex2007–42] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing of Proposed Rule Change as Modified by Amendment No. 1 Amending the Required Number of Letters of Reference an Applicant Must Provide May 14, 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 April 26, 2007, the American Stock Exchange LLC (‘‘Amex’’ 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 Amex. On May 3, 2007, Amex submitted Amendment No. 1 to the proposed rule change.3 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 The Exchange proposes to amend Amex Rule 353 to require member applicants to provide two, instead of five, letters of reference. The text of the proposed rule change is available at the Amex’s Office of the Secretary, at the Commission’s Public Reference Room, and on the Amex’s Web site at http:// www.amex.com. pwalker on PROD1PC71 with NOTICES 20 17 CFR 200.30–3(a)(34). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 In Amendment No. 1, the Exchange clarified that pursuant to Article IV, Section 1(d) of the Amex Constitution, applicants for associate membership are also currently required to provide five letters of reference. 1 15 VerDate Aug<31>2005 17:06 May 17, 2007 Jkt 211001 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Amex included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Amex has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Amex Rule 353 currently requires a member applicant to provide five letters of reference from any person seeking status as a regular, options principal member or LTP holder.4 The Exchange proposes to amend Rule 353 to require member applicants to provide two, as opposed to five, letters of reference from responsible persons.5 Requiring five letters of reference has proven burdensome and time-consuming for member applicants and often delays the application process. Furthermore, the content of such references is of little consequence in an applicant’s ultimate approval. Finally, with the availability of more objective background information provided through other resources, such as WEBCRD, FBI fingerprints, and credit reports, Amex believes that the need for these letters of reference has largely been diminished. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6 of the Act 6 in general and furthers the objectives of Section 6(b)(5) 7 in particular in that it is designed to prevent fraudulent and 4 Article IV, Section 1(d) of the Amex Constitution provides that applications for associate membership shall be in a form and manner prescribed by the Exchange. The Exchange also currently requires associate member applicants to provide five letters of reference, as is set forth in Rule 353. 5 The Exchange stated that it intends to reduce the requirement for associate membership applicants from five to two letters of reference to correspond with the proposed change effecting regular, options principal members or LTP holders. Telephone conversation among Nyieri Nazarian, Associate General Counsel, Amex; Jennifer Colihan, Special Counsel, Commission, Division of Market Regulation (‘‘Division’’); and Kristie Diemer, Special Counsel, Commission, Division on May 2, 2007. 6 15 U.S.C. 78f. 7 15 U.S.C. 78f(b)(5). PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 28089 manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. B. Self-Regulatory Organization’s Statement on Burden on Competition This proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received from Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding, or (ii) as to which Amex consents, the Commission will: (A) by order approve such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–Amex–2007–42 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–Amex–2007–42. This file E:\FR\FM\18MYN1.SGM 18MYN1

Agencies

[Federal Register Volume 72, Number 96 (Friday, May 18, 2007)]
[Notices]
[Pages 28087-28089]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-9569]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55755; File No. 4-536]


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 Chicago Board 
Options Exchange, Incorporated and the National Association of 
Securities Dealers, Inc.

 May 14, 2007.
    Notice is hereby given that the Securities and Exchange Commission 
(``Commission'') has issued an Order, pursuant to Sections 17(d) and 
11A(a)(3)(B) of the Securities Exchange Act of 1934 (``Act''),\1\ 
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 \2\ by the Chicago Board 
Options Exchange, Incorporated (``CBOE'') and the National Association 
of Securities Dealers, Inc. (``NASD'') (together with CBOE, the 
``Parties'') with respect to the CBOE Stock Exchange, LLC (``CBSX''), 
which is a facility of CBOE featuring a fully-automated marketplace for 
trading of non-option securities by CBOE members.\3\
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    \1\ 15 U.S.C. 78q(d) and 15 U.S.C. 78k-1(a)(3)(B), respectively.
    \2\ 17 CFR 240.17d-2.
    \3\ See Securities Exchange Act Release No. 55612 (April 10, 
2007), 72 FR 19556 (April 18, 2007) (``Notice''). CBOE serves as the 
self-regulatory authority for CBSX.
---------------------------------------------------------------------------

    Accordingly, NASD shall assume, in addition to the regulatory 
responsibility it has under the Act, the regulatory responsibilities 
allocated to it under the Plan as they relate to the CBSX. At the same 
time, CBOE is relieved of those regulatory responsibilities allocated 
to NASD under the Plan.

I. Introduction

    Section 19(g)(1) of the Act,\4\ among other things, requires every 
self-regulatory organization (``SRO'') that is 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) or 19(g)(2) of the Act.\5\ Section 17(d)(1) 
of the Act \6\ was intended, among other things, to eliminate 
unnecessary multiple examinations and regulatory duplication for those 
broker-dealers that maintain memberships in more than one SRO (``common 
members'').\7\ 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.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78s(g)(1).
    \5\ 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), respectively.
    \6\ 15 U.S.C. 78q(d)(1).
    \7\ 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 and Rule 17d-2 under the Act.\8\ 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

[[Page 28088]]

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.
---------------------------------------------------------------------------

    \8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively. 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.
---------------------------------------------------------------------------

    On April 10, 2007, the Commission issued notice of the Plan filed 
by CBOE and NASD.\9\ The Commission received no comments on the Plan. 
The Plan is intended to reduce regulatory duplication in the 
examination of Dual Members \10\ and in the filing and processing of 
certain registration and membership records as it relates to the CBSX 
by allocating to NASD certain examination and enforcement 
responsibilities with respect to CBSX. Included in the Plan is an 
attachment (the ``CBOE Certification of Common Rules,'' referred to 
herein as the ``Certification'') that lists every CBOE rule applicable 
to CBSX,\11\ and any federal securities law, rule, or regulation for 
which, under the Plan, NASD would bear responsibility for examining, 
and enforcing compliance by, common members.
---------------------------------------------------------------------------

    \9\ See Notice, supra note 3.
    \10\ See Section 1(c) of the Plan (defining Dual Member as 
``those CBOE members that are also members of NASD and the persons 
associated therewith'').
    \11\ As noted in the Certification, to the extent that any CBOE 
rule listed on the Certification makes reference to options, such 
rule shall be read to apply to equity securities as provided by CBOE 
Rule 53.6.
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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 \12\ and Rule 17d-2(c) 
thereunder \13\ 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 should reduce 
unnecessary regulatory duplication by allocating to NASD certain 
responsibilities for common members that would otherwise be performed 
by both CBOE and NASD. Accordingly, the proposed Plan promotes 
efficiency by reducing costs to common members. Furthermore, because 
CBOE and NASD will coordinate their regulatory functions in accordance 
with the Plan, the Plan should promote investor protection.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78q(d).
    \13\ 17 CFR 240.17d-2(c).
---------------------------------------------------------------------------

    The Commission notes that, under the Plan, CBOE and NASD have 
allocated regulatory responsibility for those CBOE governing the 
operation of CBSX that are substantially similar to NASD rules in that 
examination for compliance with each applicable CBOE rule would not 
require NASD to develop one or more new examination standards, modules, 
procedures, or criteria to analyze the application of the rule, or a 
Dual Member's activity, conduct, or output in relation to such rule 
(``Common Rules''). The Common Rules covered by the Plan are 
specifically listed in the Certification, as may be amended by the 
Parties from time to time.\14\ In addition, under the Plan, 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.
---------------------------------------------------------------------------

    \14\ CBOE has represented that, with respect to CBSX, there are 
no CBOE rules that are substantially similar to NASD rules that are 
within the scope of the Plan but not included in the Certification. 
See Telephone call between Richard Holley III, Special Counsel, 
Division of Market Regulation, Commission, and Lawrence J. 
Bresnahan, Vice President, Member Firm Regulation, CBOE, on May 11, 
2007.
---------------------------------------------------------------------------

    The Plan further provides that NASD shall not assume regulatory 
responsibility, and CBOE will retain full responsibility, for: (1) 
Surveillance and enforcement with respect to trading activities or 
practices involving CBOE's own marketplace, including without 
limitation CBOE's rules relating to the rights and obligations of 
market makers; (2) registration pursuant to CBOE's applicable rules of 
associated persons (i.e., registration rules that are not Common 
Rules); (3) CBOE's duties as a DEA under Rule 17d-1 of the Act;\15\ and 
(4) any rules of CBOE that do not qualify as Common Rules.
---------------------------------------------------------------------------

    \15\ 17 CFR 240.17d-1.
---------------------------------------------------------------------------

    According to the Plan, CBOE will review the Certification, at least 
annually, or more frequently if required by changes in either the rules 
of CBOE or NASD, and, if necessary, submit to NASD an updated list of 
Common Rules to add CBOE rules not included on the then-current list of 
Common Rules that are substantially similar to NASD rules; delete CBOE 
rules included in the then-current list of Common Rules that are no 
longer substantially similar to NASD rules; and confirm that the 
remaining rules on the list of Common Rules continue to be CBOE rules 
that are substantially similar to NASD rules.\16\ 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, CBOE will also 
provide NASD with a current list of dual members and shall update the 
list no less frequently than once each quarter.\17\
---------------------------------------------------------------------------

    \16\ See Section 2 of the Plan.
    \17\ See Section 3 of the Plan.
---------------------------------------------------------------------------

    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 CBOE rules applicable to CBSX 
that are substantially similar to the rules of NASD for Dual Members of 
CBOE 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 
CBOE rules in the Certification in conformance with the definition of 
Common Rules provided in the Plan. However, should the Parties decide 
to add a CBOE rule to the Certification that is not substantially 
similar to an NASD rule; delete a CBOE rule from the Certification that 
is substantially similar to an NASD rule; or leave on the Certification 
a CBOE 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.\18\
---------------------------------------------------------------------------

    \18\ The Commission also notes that the addition to or 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, Dual Members, also would 
constitute an amendment to the Plan.
---------------------------------------------------------------------------

    The Plan also permits CBOE and NASD to terminate the Plan, subject 
to notice. 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.\19\
---------------------------------------------------------------------------

    \19\ The Commission notes that paragraph 13 of the Plan reflects 
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. 4-536. 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. 4-536, between CBOE 
and NASD, filed pursuant to Rule 17d-2 under the Act, is approved and 
declared effective.

[[Page 28089]]

    It is therefore ordered that CBOE is relieved of those 
responsibilities allocated to the NASD under the Plan in File No. 4-
536.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(34).
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Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E7-9569 Filed 5-17-07; 8:45 am]
BILLING CODE 8010-01-P