Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Amendments to FINRA's New York Stock Exchange Rule 409(f), 529-531 [E7-25508]

Download as PDF Federal Register / Vol. 73, No. 2 / Thursday, January 3, 2008 / Notices Interpretation and Policy .11(e) to CBOE Rule 24.9 to (i) note that the Exchange shall designate no more than 9 individual stocks for inclusion in the $1 Strike Program at the same time there are strike prices listed at $1 intervals on Mini-SPX options,5 and (ii) make a technical correction to a cross-reference to Interpretation and Policy .01(a) to CBOE Rule 5.5. III. Commission’s Findings and Order Granting Approval of the Proposed Rule Change pwalker on PROD1PC71 with NOTICES After careful review and based on the Exchange’s representations, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.6 In particular, the Commission finds that the proposed rule change is consistent with section 6(b)(5) of the Act 7 in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Specifically, the Commission believes that the proposed expansion to permit the Exchange to select a total of 10 individual underlying stocks trading at less than $50 on which option series may be listed at $1 strike price intervals, and the request to make the $1 Strike Program permanent, should provide investors with added flexibility in the trading of equity options and further the public interest by allowing investors to establish equity options positions that 5 Although the $1 Strike Program generally allowed CBOE to select a total of 5 individual stocks on which option series may be listed at $1 strike price intervals, the $1 Strike Program provided that CBOE could designate no more than 4 individual stocks for inclusion in the $1 Strike Program at the same time there are strike prices listed at $1 intervals on Mini-SPX options in accordance with Interpretation and Policy .11 to CBOE Rule 24.9. See Securities Exchange Act Release No. 52625 (October 18, 2005), 70 FR 61479 (October 24, 2005) (SR–CBOE–2005–81) (providing that as long as there are open Mini-SPX option series listed at $1 strike price intervals, the Exchange would be required to surrender one of its five selections under the $1 Strike Program). If CBOE decides to discontinue listing Mini-SPX option series at $1 strike price intervals, CBOE would again be free to select up to 10 option classes for inclusion in the $1 Strike Program, as proposed. 6 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). 7 15 U.S.C. 78f(b)(5). VerDate Aug<31>2005 20:29 Jan 02, 2008 Jkt 214001 are better tailored to meet their investment objectives. The Commission also believes that the proposal strikes a reasonable balance between the Exchange’s desire to accommodate market participants by offering a wider array of investment opportunities and the need to avoid unnecessary proliferation of options series and the corresponding increase in quotes. The Commission notes that the existing restrictions on listing $1 strike price intervals will continue to apply, e.g., no $1 strike price may be listed (a) that is greater than $5 from the underlying stock’s closing price in its primary market on the previous day, or (b) that would result in strike prices being $0.50 apart. The Commission expects the Exchange to continue to monitor for options with little or no open interest and trading activity and to act promptly to delist such options. In addition, the Commission expects that CBOE will continue to monitor the trading volume associated with the additional options series listed as a result of this proposal and the effect of these additional series on market fragmentation and on the capacity of the Exchange’s, OPRA’s, and vendors’ automated systems. IV. Conclusion It is therefore ordered, pursuant to section 19(b)(2) of the Act,8 that the proposed rule change (SR–CBOE–2007– 125), as modified by Amendment No. 2 thereto, be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.9 Nancy M. Morris, Secretary. [FR Doc. E7–25570 Filed 1–2–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57045; File No. SR–FINRA– 2007–037] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Amendments to FINRA’s New York Stock Exchange Rule 409(f) December 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 December 21, 2007, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) (f/k/a National Association of Securities Dealers, Inc. (‘‘NASD’’)) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by FINRA. FINRA has designated the proposed rule change as constituting a ‘‘noncontroversial’’ rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6) 4 thereunder, which renders the proposal effective upon receipt of this filing by the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to amend New York Stock Exchange (‘‘NYSE’’) Rule 409(f), to delete the requirement that certain confirmations and reports include the name of the securities market on which a transaction is effected. Below is the text of the proposed rule change. Proposed new language is in italics; proposed deletions are in brackets. * * * * * Rule 409. Statements of Accounts to Customers (a) through (e) No change. (f) Confirmation of all transactions (including those made ‘‘over-thecounter’’ and on other exchanges) in securities admitted to dealings on the Exchange, sent by members or member organizations to their customers, shall [indicate]clearly set forth with a suitable legend the settlement date of each transaction[ and bear the name of the securities market on which the transaction was made]. This requirement also applies to confirmations or reports from an organization to a correspondent, but does not apply to reports made by floor brokers to the member organization from whom the orders were received. [All confirmations shall contain a suitable legend clearly setting forth all required information.] (g) No change. * * * * * 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6). 2 17 8 15 9 17 PO 00000 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). Frm 00086 Fmt 4703 Sfmt 4703 529 E:\FR\FM\03JAN1.SGM 03JAN1 530 Federal Register / Vol. 73, No. 2 / Thursday, January 3, 2008 / Notices II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA 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. FINRA 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 pwalker on PROD1PC71 with NOTICES NYSE Rule 409(f) requires that confirmations of all transactions (including those made over-the-counter and on other exchanges) in securities admitted to dealings on the NYSE, and sent by FINRA members that are also members of NYSE (‘‘Dual Members’’) to their customers, indicate the settlement date of the transaction and the name of the securities market on which the transaction was effected.5 This requirement also applies to confirmations or reports from an organization to a correspondent, but does not apply to reports made by floor brokers to the member organization from which the orders were received. Following the SEC’s adoption of Regulation NMS, an increasing number of orders, or portions of orders, routed to a given market for execution are rerouted to other markets that, at that time, display a better quotation. This process, which often is necessary due to the requirements of the Order Protection Rule under Regulation NMS, may lead to relatively small orders receiving executions in multiple market centers.6 This has created an operational challenge for Dual Members to capture the name of the market of execution on a timely basis for inclusion on the transaction confirmation as required by NYSE Rule 409(f). As a result of this 5 FINRA incorporated NYSE Rule 409(f) into its interim rulebook; however, the incorporated NYSE rules, including NYSE Rule 409(f), apply solely to Dual Members. See Securities Exchange Act Release No. 56147 (July 26, 2007), 72 FR 42166 (August 1, 2007) (Notice of Filing and Order Granting Accelerated Approval of SR–NASD–2007–054). 6 The Order Protection Rule requires trading centers, including broker-dealers that internally execute orders, to establish, maintain, and enforce written policies and procedures reasonably designed to protect against ‘‘trade-throughs’’ of protected quotations in NMS stocks. See 17 CFR 242.611(a). VerDate Aug<31>2005 20:29 Jan 02, 2008 Jkt 214001 challenge, on March 20, 2007, NYSE granted its member organizations temporary relief from the requirement that confirmations and correspondent reports include the securities market on which the transaction was effected.7 The temporary relief, which expired on September 30, 2007, was extended by FINRA and by NYSE until January 1, 2008.8 In extending the relief, both FINRA and NYSE stated that they would continue to reassess the utility of NYSE Rule 409(f) in the current regulatory environment. Under the duty of best execution, Dual Members are required to exercise diligence to obtain the best price when routing customer trades for execution,9 and Regulation NMS imposes disclosure obligations on broker-dealers regarding the handling of customer orders.10 In this regard, NASD Rule 2320 requires every FINRA member to employ reasonable diligence in ascertaining best execution in the execution of a transaction. As stated in NASD Notice to Members 01–22, members generally may execute such diligence on either a tradeby-trade basis or through the regular and rigorous review of the execution quality of various market centers. FINRA has concluded that in light of these existing best execution and disclosure requirements, the usefulness of including on a confirmation or correspondent report the securities market on which a transaction was effected does not outweigh the operational difficulties of capturing the information following the adoption of Regulation NMS. Consequently, the proposed rule change would delete from NYSE Rule 409(f) the requirement that confirmations and correspondent reports include the securities market on which the transaction was effected. Dual Members would, however, still be required to indicate the settlement date 7 See NYSE Information Memo 07–28 (March 20, 2007). 8 See FINRA Regulatory Notice 07–35 (August 2007); NYSE Information Memo 07–84 (August 2, 2007). 9 See, e.g., Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37537–38 (June 29, 2005) (discussing the duty of best execution in relation to Regulation NMS). 10 SEC Rule 606(b) requires a broker-dealer to disclose to its customer upon request ‘‘the identity of the venue to which the customer’s orders were routed for execution in the six months prior to the request, whether the orders were directed orders or non-directed orders, and the time of the transactions, if any, that resulted from such orders.’’ See 17 CFR 242.606(b). SEC Rule 607 requires a broker-dealer that acts as agent for a customer to disclose, in writing, upon opening a new account and on an annual basis thereafter, the firm’s policies regarding receipt of payment for order flow and the firm’s policies for determining where to route customer orders that are the subject of payment for order flow. See 17 CFR 242.607(a). PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 of each transaction on customer and correspondent confirmations and correspondent reports for all transactions (including those made over-the-counter and on other exchanges) in securities admitted to dealings on the NYSE. FINRA has filed the proposed rule change for immediate effectiveness. The operative date will be January 1, 2008. 2. Statutory Basis FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,11 which requires, among other things, that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. FINRA believes that the operational difficulties of including on a confirmation or correspondent report the securities market on which a transaction was effected outweigh the benefits of including the information in light of existing best execution and disclosure requirements. B. Self-Regulatory Organization’s Statement on Burden on Competition FINRA does not believe that the proposed rule change will result in 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 Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 12 and Rule 19b– 4(f)(6) thereunder.13 In accordance with Rule 19b–4,14 FINRA submitted written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed 11 15 U.S.C. 78o–3(b)(6). U.S.C. 78s(b)(3)(A). 13 17 CFR 240.19b–4(f)(6). 14 17 CFR 240.19b–4. 12 15 E:\FR\FM\03JAN1.SGM 03JAN1 Federal Register / Vol. 73, No. 2 / Thursday, January 3, 2008 / Notices rule change, at least five business days prior to the date of filing. FINRA has requested that the Commission waive the 30-day operative delay contained in Rule 19b– 4(f)(6)(iii) 15 under the Act based upon a representation that the temporary exemptive relief provided by FINRA and NYSE expires on January 1, 2008. In light of the foregoing, the Commission believes such waiver is consistent with the protection of investors and the public interest. Accordingly, the Commission designates the proposal to be effective upon filing with the Commission and operative on January 1, 2008.16 At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–FINRA–2007–037 on the subject line. pwalker on PROD1PC71 with NOTICES 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–FINRA–2007–037. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements 15 17 CFR 240.19b–4(f)(6)(iii). purposes only of waiving the 30-day operative delay of this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 16 For VerDate Aug<31>2005 20:29 Jan 02, 2008 Jkt 214001 with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of FINRA. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–FINRA–2007–037 and should be submitted on or before January 24, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Nancy M. Morris, Secretary. [FR Doc. E7–25508 Filed 1–2–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57050; File No. SR–FINRA– 2007–040] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change To Delay Implementation of Certain FINRA Rule Changes Approved in SR–NASD– 2004–183 December 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 December 21, 2007, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) (f/k/a National Association of Securities Dealers, Inc. (‘‘NASD’’)) 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 FINRA. The Commission is publishing this notice to 17 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 531 solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to delay the effective date of certain FINRA rule changes approved in SR–NASD–2004– 183 until August 4, 2008. There are no new changes proposed to the text of the FINRA rules. Paragraphs (a), (b), (d), and (e) of Rule 2821, approved pursuant to SR–NASD–2004– 183, will become effective on May 5, 2008.3 FINRA is proposing to delay the effective date of paragraph (c) of Rule 2821, also approved pursuant to SR– NASD–2004–183,4 until August 4, 2008. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA 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. FINRA 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 On September 7, 2007, the Commission noticed the filing of Amendment Nos. 3 and 4 and granted accelerated approval of SR–NASD– 2004–183, FINRA’s new NASD Rule 2821, regarding broker-dealers’ compliance and supervisory responsibilities for deferred variable annuities.5 On November 6, 2007, FINRA published Regulatory Notice 07– 53, which announced the Commission’s approval of Rule 2821 (SR–NASD– 2004–183) and established May 5, 2008 as the rule’s effective date. Following Commission approval of the rule and publication of the Regulatory Notice, several firms requested that the effective 3 See Order Approving FINRA’s NASD Rule 2821 Regarding Members’ Responsibilities for Deferred Variable Annuities (Approval Order), Securities Exchange Act Release No. 56375 (September 7, 2007), 72 FR 52403 (September 13, 2007) (SR– NASD–2004–183); Corrective Order, Securities Exchange Act Release No. 56375A (September 14, 2007), 72 FR 53612 (September 19, 2007) (SR– NASD–2004–183) (correcting the rule’s effective date). 4 Id. 5 Id. E:\FR\FM\03JAN1.SGM 03JAN1

Agencies

[Federal Register Volume 73, Number 2 (Thursday, January 3, 2008)]
[Notices]
[Pages 529-531]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-25508]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57045; File No. SR-FINRA-2007-037]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change Relating to Amendments to FINRA's New York Stock 
Exchange Rule 409(f)

December 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 December 21, 2007, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc. 
(``NASD'')) filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been substantially prepared by 
FINRA. FINRA has designated the proposed rule change as constituting a 
``non-controversial'' rule change pursuant to Section 19(b)(3)(A) of 
the Act \3\ and Rule 19b-4(f)(6) \4\ thereunder, which renders the 
proposal effective upon receipt of this filing by the Commission. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    FINRA is proposing to amend New York Stock Exchange (``NYSE'') Rule 
409(f), to delete the requirement that certain confirmations and 
reports include the name of the securities market on which a 
transaction is effected. Below is the text of the proposed rule change. 
Proposed new language is in italics; proposed deletions are in 
brackets.
* * * * *

Rule 409. Statements of Accounts to Customers

    (a) through (e) No change.
    (f) Confirmation of all transactions (including those made ``over-
the-counter'' and on other exchanges) in securities admitted to 
dealings on the Exchange, sent by members or member organizations to 
their customers, shall [indicate]clearly set forth with a suitable 
legend the settlement date of each transaction[ and bear the name of 
the securities market on which the transaction was made]. This 
requirement also applies to confirmations or reports from an 
organization to a correspondent, but does not apply to reports made by 
floor brokers to the member organization from whom the orders were 
received.
    [All confirmations shall contain a suitable legend clearly setting 
forth all required information.]
    (g) No change.
* * * * *

[[Page 530]]

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, FINRA 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. FINRA has prepared summaries, set forth in sections A, 
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NYSE Rule 409(f) requires that confirmations of all transactions 
(including those made over-the-counter and on other exchanges) in 
securities admitted to dealings on the NYSE, and sent by FINRA members 
that are also members of NYSE (``Dual Members'') to their customers, 
indicate the settlement date of the transaction and the name of the 
securities market on which the transaction was effected.\5\ This 
requirement also applies to confirmations or reports from an 
organization to a correspondent, but does not apply to reports made by 
floor brokers to the member organization from which the orders were 
received.
---------------------------------------------------------------------------

    \5\ FINRA incorporated NYSE Rule 409(f) into its interim 
rulebook; however, the incorporated NYSE rules, including NYSE Rule 
409(f), apply solely to Dual Members. See Securities Exchange Act 
Release No. 56147 (July 26, 2007), 72 FR 42166 (August 1, 2007) 
(Notice of Filing and Order Granting Accelerated Approval of SR-
NASD-2007-054).
---------------------------------------------------------------------------

    Following the SEC's adoption of Regulation NMS, an increasing 
number of orders, or portions of orders, routed to a given market for 
execution are rerouted to other markets that, at that time, display a 
better quotation. This process, which often is necessary due to the 
requirements of the Order Protection Rule under Regulation NMS, may 
lead to relatively small orders receiving executions in multiple market 
centers.\6\ This has created an operational challenge for Dual Members 
to capture the name of the market of execution on a timely basis for 
inclusion on the transaction confirmation as required by NYSE Rule 
409(f). As a result of this challenge, on March 20, 2007, NYSE granted 
its member organizations temporary relief from the requirement that 
confirmations and correspondent reports include the securities market 
on which the transaction was effected.\7\ The temporary relief, which 
expired on September 30, 2007, was extended by FINRA and by NYSE until 
January 1, 2008.\8\ In extending the relief, both FINRA and NYSE stated 
that they would continue to reassess the utility of NYSE Rule 409(f) in 
the current regulatory environment.
---------------------------------------------------------------------------

    \6\ The Order Protection Rule requires trading centers, 
including broker-dealers that internally execute orders, to 
establish, maintain, and enforce written policies and procedures 
reasonably designed to protect against ``trade-throughs'' of 
protected quotations in NMS stocks. See 17 CFR 242.611(a).
    \7\ See NYSE Information Memo 07-28 (March 20, 2007).
    \8\ See FINRA Regulatory Notice 07-35 (August 2007); NYSE 
Information Memo 07-84 (August 2, 2007).
---------------------------------------------------------------------------

    Under the duty of best execution, Dual Members are required to 
exercise diligence to obtain the best price when routing customer 
trades for execution,\9\ and Regulation NMS imposes disclosure 
obligations on broker-dealers regarding the handling of customer 
orders.\10\ In this regard, NASD Rule 2320 requires every FINRA member 
to employ reasonable diligence in ascertaining best execution in the 
execution of a transaction. As stated in NASD Notice to Members 01-22, 
members generally may execute such diligence on either a trade-by-trade 
basis or through the regular and rigorous review of the execution 
quality of various market centers. FINRA has concluded that in light of 
these existing best execution and disclosure requirements, the 
usefulness of including on a confirmation or correspondent report the 
securities market on which a transaction was effected does not outweigh 
the operational difficulties of capturing the information following the 
adoption of Regulation NMS. Consequently, the proposed rule change 
would delete from NYSE Rule 409(f) the requirement that confirmations 
and correspondent reports include the securities market on which the 
transaction was effected. Dual Members would, however, still be 
required to indicate the settlement date of each transaction on 
customer and correspondent confirmations and correspondent reports for 
all transactions (including those made over-the-counter and on other 
exchanges) in securities admitted to dealings on the NYSE.
---------------------------------------------------------------------------

    \9\ See, e.g., Securities Exchange Act Release No. 51808 (June 
9, 2005), 70 FR 37496, 37537-38 (June 29, 2005) (discussing the duty 
of best execution in relation to Regulation NMS).
    \10\ SEC Rule 606(b) requires a broker-dealer to disclose to its 
customer upon request ``the identity of the venue to which the 
customer's orders were routed for execution in the six months prior 
to the request, whether the orders were directed orders or non-
directed orders, and the time of the transactions, if any, that 
resulted from such orders.'' See 17 CFR 242.606(b). SEC Rule 607 
requires a broker-dealer that acts as agent for a customer to 
disclose, in writing, upon opening a new account and on an annual 
basis thereafter, the firm's policies regarding receipt of payment 
for order flow and the firm's policies for determining where to 
route customer orders that are the subject of payment for order 
flow. See 17 CFR 242.607(a).
---------------------------------------------------------------------------

    FINRA has filed the proposed rule change for immediate 
effectiveness. The operative date will be January 1, 2008.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\11\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. FINRA believes that the operational difficulties of 
including on a confirmation or correspondent report the securities 
market on which a transaction was effected outweigh the benefits of 
including the information in light of existing best execution and 
disclosure requirements.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

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

    FINRA does not believe that the proposed rule change will result in 
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

    Written comments were neither solicited nor received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) thereunder.\13\ In accordance with Rule 19b-4,\14\ FINRA 
submitted written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed

[[Page 531]]

rule change, at least five business days prior to the date of filing.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    FINRA has requested that the Commission waive the 30-day operative 
delay contained in Rule 19b-4(f)(6)(iii) \15\ under the Act based upon 
a representation that the temporary exemptive relief provided by FINRA 
and NYSE expires on January 1, 2008. In light of the foregoing, the 
Commission believes such waiver is consistent with the protection of 
investors and the public interest. Accordingly, the Commission 
designates the proposal to be effective upon filing with the Commission 
and operative on January 1, 2008.\16\
---------------------------------------------------------------------------

    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2007-037 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-FINRA-2007-037. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of FINRA. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-FINRA-2007-037 and should be 
submitted on or before January 24, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E7-25508 Filed 1-2-08; 8:45 am]
BILLING CODE 8011-01-P