Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amendment to the Plan for the Allocation of Regulatory Responsibilities Among the American Stock Exchange LLC, the Boston Stock Exchange, Inc., the Chicago Board Options Exchange, Incorporated, the International Securities Exchange, LLC, Financial Industry Regulatory Authority, Inc., The NASDAQ Stock Market LLC, the New York Stock Exchange, LLC, NYSE Arca, Inc., and the Philadelphia Stock Exchange, Inc., 14507-14512 [E8-5321]

Download as PDF Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Notices mstockstill on PROD1PC66 with NOTICES OMB Control No. 3235–0009. 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. Information collected and information prepared pursuant to Regulation S–X focus on the form and content of, and requirements for, financial statements filed with periodic reports and in connection with the offer and sale of securities. Investors need reasonably current financial statements to make informed investment and voting decisions. The potential respondents include all entities that file registration statements or reports pursuant to the Securities Act of 1933 (15 U.S.C. 77a et seq.), the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) or the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.). Regulation S–X specifies the form and content of financial statements when those financial statements are required to be filed by other rules and forms under the federal securities laws. Compliance burdens associated with the financial statements are assigned to the rule or form that directly requires the financial statements to be filed, not to Regulation S–X. Instead, an estimated burden of one hour traditionally has been assigned to Regulation S–X for incidental reading of the regulation. The estimated average burden hours are solely for purposes of the Paperwork Reduction Act and are not derived from a comprehensive or even a representative survey or study of the costs of SEC rules or forms. Written comments are invited on: (a) Whether the 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 of the burden of 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. VerDate Aug<31>2005 17:39 Mar 17, 2008 Jkt 214001 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, Virginia 22312; or send an e-mail to: PRA_Mailbox@sec.gov. Dated: March 11, 2008. Florence E. Harmon, Deputy Secretary. [FR Doc. E8–5356 Filed 3–17–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57481; File No. S7–966] Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d– 2; Notice of Filing and Order Approving and Declaring Effective an Amendment to the Plan for the Allocation of Regulatory Responsibilities Among the American Stock Exchange LLC, the Boston Stock Exchange, Inc., the Chicago Board Options Exchange, Incorporated, the International Securities Exchange, LLC, Financial Industry Regulatory Authority, Inc., The NASDAQ Stock Market LLC, the New York Stock Exchange, LLC, NYSE Arca, Inc., and the Philadelphia Stock Exchange, Inc. March 12, 2008. Notice is hereby given that the Securities and Exchange Commission (‘‘Commission’’) has issued an Order, pursuant to Section 17(d) of the Securities Exchange Act of 1934 (‘‘Act’’),1 approving and declaring effective an amendment to the plan for allocating regulatory responsibility filed pursuant to Rule 17d–2 of the Act,2 by the American Stock Exchange LLC (‘‘Amex’’), the Boston Stock Exchange, Inc. (‘‘BSE’’), the Chicago Board Options Exchange, Incorporated (‘‘CBOE’’), the International Securities Exchange, LLC (‘‘ISE’’), Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’), The NASDAQ Stock Market LLC (‘‘NASDAQ’’), the New York Stock Exchange (‘‘NYSE’’), NYSE Arca, Inc. (‘‘NYSE Arca’’), and the Philadelphia Stock Exchange, Inc. (‘‘Phlx’’) (collectively, ‘‘SRO participants’’). Section 19(g)(1) of the Act,3 among other things, requires every selfregulatory organization (‘‘SRO’’) 1 15 U.S.C. 78q(d). CFR 240.17d–2. 3 15 U.S.C. 78s(g)(1). 2 17 PO 00000 Frm 00079 Fmt 4703 registered as either a national securities exchange or national 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)4 or Section 19(g)(2)5 of the Act. Without this relief, the statutory obligation of each individual SRO could result in a pattern of multiple examinations of broker-dealers that maintain memberships in more than one SRO (‘‘common members’’). Such regulatory duplication would add unnecessary expenses for common members and their SROs. Section 17(d)(1) of the Act 6 was intended, in part, to eliminate unnecessary multiple examinations and regulatory duplication.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–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.9 When an SRO has been named as a common member’s DEA, all other SROs to which the common member belongs are relieved of the responsibility to examine the firm for compliance with the applicable financial responsibility rules. On its face, Rule 17d–1 deals only with an SRO’s obligations to enforce member compliance with financial responsibility requirements. Rule 17d–1 does not relieve an SRO from its obligation to examine a common member for compliance with its own rules and provisions of the federal securities laws governing matters other than financial responsibility, including 4 15 U.S.C. 78q(d). U.S.C. 78s(g)(2). 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. 9 See Securities Exchange Act Release No. 12352 (April 20, 1976), 41 FR 18808 (May 7, 1976). 5 15 I. Introduction Sfmt 4703 14507 E:\FR\FM\18MRN1.SGM 18MRN1 14508 Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Notices sales practices and trading activities and practices. To address regulatory duplication in these and other areas, the Commission adopted Rule 17d–2 under the Act.10 Rule 17d–2 permits SROs to propose joint plans for the allocation of regulatory responsibilities 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. Commission approval of a plan filed pursuant to Rule 17d–2 relieves an SRO of those regulatory responsibilities allocated by the plan to another SRO. II. The Plan mstockstill on PROD1PC66 with NOTICES On September 8, 1983, the Commission approved the SRO participants’ plan for allocating regulatory responsibilities pursuant to Rule 17d–2.11 On May 23, 2000, the Commission approved an amendment to the plan that added the ISE as a participant.12 On November 8, 2002, the Commission approved another amendment that replaced the original plan in its entirety and, among other things, allocated regulatory responsibilities among all the participants in a more equitable manner.13 On February 5, 2004, the parties submitted an amendment to the plan, primarily to include the BSE, which was establishing a new options trading facility to be known as the Boston Options Exchange (‘‘BOX’’), as an SRO participant.14 On December 5, 2007, the parties submitted an amendment to the plan to, among other things, provide that the National Association of Securities Dealers (‘‘NASD’’) (n/k/a the Financial Industry Regulatory Authority, Inc. or ‘‘FINRA’’) 10 See Securities Exchange Act Release No. 12935 (October 28, 1976), 41 FR 49091 (November 8, 1976). 11 See Securities Exchange Act Release No. 20158 (September 8, 1983), 48 FR 41256 (September 14, 1983). 12 See Securities Exchange Act Release No. 42816 (May 23, 2000), 65 FR 34759 (May 31, 2000). 13 See Securities Exchange Act Release No. 46800 (November 8, 2002), 67 FR 69774 (November 19, 2002). 14 See Securities Exchange Act Release No. 49197 (February 5, 2004), 69 FR 7046 (February 12, 2004). VerDate Aug<31>2005 17:39 Mar 17, 2008 Jkt 214001 and NYSE are Designated Options Examining Authorities under the plan.15 The plan reduces regulatory duplication for a large number of firms currently members of two or more of the SRO participants by allocating regulatory responsibility for certain options-related sales practice matters to one of the SRO participants. Generally, under the current plan, the SRO participant responsible for conducting options-related sales practice examinations of a firm, and investigating options-related customer complaints and terminations for cause of associated persons of that firm, is known as the firm’s ‘‘Designated Options Examining Authority’’ (‘‘DOEA’’). Pursuant to the current plan, any other SRO of which the firm is a member is relieved of these responsibilities during the period in which the firm is assigned to another SRO acting as that firm’s DOEA. III. Proposed Amendment to the Plan On December 27, 2007, the parties submitted a proposed amendment to the plan. The primary purpose of the amendment is to add NASDAQ as an SRO participant and to reflect the name change of NASD to FINRA. The amended agreement replaces the previous agreement in its entirety. The text of the proposed amended 17d–2 plan is as follows (additions are italicized; deletions are [bracketed]): * * * * * Agreement by and among the American Stock Exchange, LLC, the Boston Stock Exchange, Inc., the Chicago Board Options Exchange, Inc., the International Securities Exchange, LLC, Financial Industry Regulatory Authority [the National Association of Securities Dealers], Inc., the New York Stock Exchange, LLC, the NYSE Arca Inc., The NASDAQ Stock Market LLC, and the Philadelphia Stock Exchange, Inc., Pursuant to Rule 17d–2 under the Securities Exchange Act of 1934. This agreement (‘‘Agreement’’), by and among the American Stock Exchange, LLC, the Boston Stock Exchange, Inc., the Chicago Board Options Exchange, Inc., the International Securities Exchange, LLC, Financial Industry Regulatory Authority [the National Association of Securities Dealers], Inc. (‘‘FINRA[NASD]’’), The NASDAQ Stock Market LLC (‘‘NASDAQ’’), the New York Stock Exchange, LLC (‘‘NYSE’’), the NYSE Arca, Inc., and the Philadelphia Stock Exchange, Inc., hereinafter collectively referred to as the Participants, is made 15 See Securities Exchange Act Release No. 55532 (March 26, 2007), 72 FR 15729 (April 2, 2007). PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 this 27th[1st] day of December, 2007[6], pursuant to the provisions of Rule 17d– 2 under the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’), which allows for plans among self-regulatory organizations to allocate regulatory responsibility. This Agreement shall be administered by a committee known as the Options Self-Regulatory Council (the ‘‘Council’’). This Agreement amends and restates the agreement entered into among the Participants on December 1, 2006, entitled ‘‘Agreement by and among the American Stock Exchange, LLC, the Boston Stock Exchange, Inc., the Chicago Board Options Exchange, Inc., the International Securities Exchange, LLC, National Association of Securities Dealers, Inc., the New York Stock Exchange, LLC, the NYSE Arca Inc., and the Philadelphia Stock Exchange, Inc., Pursuant to Rule 17d–2 under the Securities Exchange Act of 1934.’’ Whereas, the Participants are desirous of allocating regulatory responsibilities with respect to broker-dealers, and persons associated therewith, that are members† 1 of more than one Participant (the ‘‘Common Members’’) and conduct a public business for compliance with Common Rules (as hereinafter defined) relating to the conduct by broker-dealers of accounts for listed options, index warrants, currency index warrants and currency warrants (collectively, ‘‘Covered Securities’’); and Whereas, the Participants are desirous of executing a plan for this purpose pursuant to the provisions of Rule 17d– 2 and filing such plan with the Securities and Exchange Commission (‘‘SEC’’ or the ‘‘Commission’’) for its approval; Now, therefore, in consideration of the mutual covenants contained hereafter, the Participants agree as follows: I. As used herein the term Designated Options Examining Authority (‘‘DOEA’’) shall mean FINRA[NASD] and NYSE insofar as each shall perform Regulatory Responsibility (as hereinafter defined) for its broker-dealer members that also are members of another Participant, and allocated to it in accordance with the terms hereof. The Designated Examination Authority (‘‘DEA’’) pursuant to SEC Rule 17d–1 under the Securities Exchange Act (‘‘Rule 17d–1’’) for a broker-dealer that is a member of a more than one Participant (but not a member of a DOEA) shall perform the Regulatory Responsibility under the † 1 In the case of the Boston Stock Exchange, Inc., and NASDAQ members are those persons who are options participants (as defined in the BOX and NASDAQ Options Market Rules). E:\FR\FM\18MRN1.SGM 18MRN1 mstockstill on PROD1PC66 with NOTICES Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Notices Agreement as if such DEA were the DOEA. II. As used herein, the term ‘‘Regulatory Responsibility’’ shall mean the examination and enforcement responsibilities relating to compliance by broker-dealers that are members of more than one Participant (the ‘‘Common Members’’) with the rules of the applicable Participant that are substantially similar to the rules of the other Participants (the ‘‘Common Rules’’), insofar as they apply to the conduct of accounts for Covered Securities. A list of the current Common Rules of each Participant applicable to the conduct of accounts for Covered Securities is attached hereto as Exhibit A. Each year within 30 days of the anniversary date of the commencement of operation of this Agreement, each Participant shall submit in writing to each DOEA and DEA performing as a DOEA for any members of such Participant any revisions to Exhibit A reflecting changes in the rules of the Participant or DOEAs, and confirm that all other rules of the Participant listed in Exhibit A continue to meet the definition of Common Rules as defined in this Agreement. Within 30 days from the date that each DOEA has received revisions and/or confirmation that no change has been made to Exhibit A from all Participants, the DOEAs shall confirm in writing to each Participant whether the rules listed in any updated Exhibit A are Common Rules as defined in this Agreement. Notwithstanding anything herein to the contrary, it is explicitly understood that the term ‘‘Regulatory Responsibility’’ does not include, and each of the Participants shall (unless allocated pursuant to Rule 17d–2 otherwise than under this Agreement) retain full responsibility for, each of the following: (a) Surveillance and enforcement with respect to trading activities or practices involving its own marketplace, including without limitation its rules relating to the rights and obligations of specialists and other market makers; (b) Registration pursuant to its applicable rules of associated persons; (c) Discharge of its duties and obligations as a DEA; and (d) Evaluation of advertising, responsibility for which shall remain with the Participant to which a Common Member submits same for approval. III. Apparent violations of another Participant’s rules discovered by a DOEA, but which rules are not within the scope of the discovering DOEA’s Regulatory Responsibility, shall be referred to the relevant Participant for such action as the Participant to which VerDate Aug<31>2005 17:39 Mar 17, 2008 Jkt 214001 such matter has been referred deems appropriate. Notwithstanding the foregoing, nothing contained herein shall preclude a DOEA in its discretion from requesting that another Participant conduct an enforcement proceeding on a matter for which the requesting DOEA has Regulatory Responsibility. If such other Participants agree, the Regulatory Responsibility in such case shall be deemed transferred to the accepting Participant. Each Participant agrees, upon request, to make available promptly all relevant files, records and/ or witnesses necessary to assist another Participant in an investigation or enforcement proceeding. IV. The Council shall be composed of one representative designated by each of the Participants. Each Participant shall also designate one or more persons as its alternate representative(s). In the absence of the representative of a Participant, such alternate representative shall have the same powers, duties and responsibilities as the representative. Each Participant may, at any time, by notice to the then Chair of the Council, replace its representative and/or its alternate representative on such Council. A majority of the Council shall constitute a quorum and, unless specifically otherwise required, the affirmative vote of a majority of the Council members present (in person, by telephone or by written consent) shall be necessary to constitute action by the Council. From time to time, the Council shall elect one member from the DOEAs to serve as Chair and another from the Council to serve as Vice Chair (to substitute for the Chair in the event of his or her unavailability at a meeting of the Council). All notices and other communications for the Council shall be sent to it in care of the Chair or to each of the representatives. V. The Council shall determine the times and locations of Council meetings, provided that the Chair, acting alone, may also call a meeting of the Council in the event the Chair determines that there is good cause to do so. To the extent reasonably possible, notice of any meeting shall be given at least tenbusiness days prior thereto. Notwithstanding anything herein to the contrary, representatives shall always be given the option of participating in any meeting telephonically at their own expense rather than in person. VI. For the purpose of fulfilling the Participants’ Regulatory Responsibilities, the DOEAs shall allocate Common Members that conduct a public business in Covered Securities among DOEAs from time to time in such manner as the DOEAs deem PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 14509 appropriate, provided that any such allocation shall be based on the following principles except to the extent affected DOEAs consent: (a) The DOEAs may not allocate a member to a DOEA unless the member is a member of that DOEA, nor shall any member be allocated to a Participant that is not a DOEA or DEA acting as a DOEA. (b) To the extent practical and desired by the DOEAs, Common Members that conduct a public business in Covered Securities shall be allocated among the DOEAs of which they are members in such manner as to equalize as nearly as possible the allocation of such Common Members among such DOEAs. (c) To the extent practical and desired by the DOEAs, the allocation of Common Members shall take into account the amount of customer activity conducted by each member in Covered Securities such that Common Members shall be allocated among the DOEAs of which they are members in such manner as most evenly divides the Common Members with the largest amount of customer activity among such DOEAs. (d) The DOEAs shall make general reallocations of Common Members from time-to-time, as it deems appropriate. (e) All Participants shall promptly notify the DOEAs no later than the next scheduled meeting of any change in membership of Common Members. Whenever a Common Member ceases to be a member of its DOEA, that DOEA shall promptly inform the other DOEAs, which will promptly review the matter and reallocate the Common Member to the extent practical. (f) A DOEA may request that a Common Member that is allocated to it be reallocated to another DOEA by giving thirty days written notice thereof. The DOEAs in their discretion may approve such request and reallocate such Common Member to another DOEA. (g) All determinations by the DOEAs with respect to allocations, if there are more than two DOEAs, shall be by the affirmative vote of a majority of the DOEAs of which such firm is a Common Member, otherwise by negotiation and consensus. VII. Each DOEA shall conduct an examination of each Common Member allocated to it on a cycle not less frequently than agreed upon by all DOEAs. The other Participants agree that, upon request, relevant information in their respective files relative to a Common Member will be made available to the applicable DOEA. At each meeting of the Council, each DOEA shall be prepared to report on the status E:\FR\FM\18MRN1.SGM 18MRN1 mstockstill on PROD1PC66 with NOTICES 14510 Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Notices of its examination program for the previous quarter and any period prior thereto that has not previously been reported to the Council. In the event a DOEA believes it will not be able to complete the examination cycle for its allocated firms, it will so advise the Council. The DOEAs may undertake to remedy this situation by reallocating selected firms or lengthening the cycles for selected firms, with the approval of all other DOEAs. VIII. Each DOEA will promptly furnish a copy of the Examination report, relating to Covered Securities, of any examination made pursuant to the provisions of this Agreement to each other Participant of which the Common Member examined is a member. IX. Each DOEA’s Regulatory Responsibility shall for each Common Member allocated to it include investigations into terminations ‘‘for cause’’ of associated persons relating to Covered Securities, unless such termination is related solely to another Participant’s market. In the latter instance, that Participant to whose market the termination for cause relates shall discharge Regulatory Responsibility with respect to such termination for cause. In connection with a DOEA’s examination, investigation and/or enforcement proceeding regarding a Covered Security-related termination for cause, the other Participants of which the Common Member is a member shall furnish, upon request, copies of all pertinent materials related thereto in their possession. As used in this Section, ‘‘for cause’’ shall include, without limitation, terminations characterized on Form U5 under the label ‘‘Permitted to Resign,’’ ‘‘Discharge’’ or ‘‘Other.’’ X. Each DOEA shall discharge the Regulatory Responsibility for each Common Member allocated to it relative to a Covered Securities-related customer complaint † 2 unless such complaint is uniquely related to another Participant’s market. In the latter instance, the DOEA shall forward the matter to that Participant to whose market the matter relates, and the latter shall discharge Regulatory Responsibility with respect thereto. If a Participant receives a customer complaint for a Common Member related to a Covered Security for which the Participant is not the DOEA, the Participant shall promptly forward a copy of such complaint to the DOEA. † 2 For purposes of complaints, they can be reported pursuant to Form U4, Form U5 or RE–3 and any amendments thereto. VerDate Aug<31>2005 17:39 Mar 17, 2008 Jkt 214001 XI. Any written notice required or permitted to be given under this Agreement shall be deemed given if sent by certified mail, return receipt requested, or by a comparable means of electronic communication to each Participant entitled to receipt thereof, to the attention of the Participant’s representative on the Council at the Participant’s then principal office or by e-mail at such address as the representative shall have filed in writing with the Chair. XII. The Participants shall notify the Common Members of this Agreement by means of a uniform joint notice approved by the Council. XIII. This Agreement may be amended in writing duly approved by each Participant. XIV. Any of the Participants may manifest its intention to cancel its participation in this Agreement at any time by giving the Council written notice thereof at least 90 days prior to the effective date of such cancellation. Upon receipt of such notice the Council shall allocate, in accordance with the provisions of this Agreement, any Common Members for which the petitioning party was the DOEA. Until such time as the Council has completed the reallocation described above; the petitioning Participant shall retain all its rights, privileges, duties and obligations hereunder. XV. The cancellation of its participation in this Agreement by any Participant shall not terminate this Agreement as to the remaining Participants. This Agreement will only terminate following notice to the Commission, in writing, by the then Participants that they intend to terminate the Agreement and the expiration of the applicable notice period. Such notice shall be given at least six months prior to the intended date of termination, provided that in the event a notice of cancellation is received from a Participant that, assuming the effectiveness thereof, would result in there being just one remaining member of the Council, notice to the Commission of termination of this Agreement shall be given promptly upon the receipt of such notice of cancellation, which termination shall be effective upon the effectiveness of the cancellation that triggered the notice of termination to the Commission. Limitation of Liability No Participant nor the Council nor any of their respective directors, governors, officers, employees or representatives shall be liable to any other Participant in this Agreement for any liability, loss or damage resulting PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 from or claimed to have resulted from any delays, inaccuracies, errors or omissions with respect to the provision of Regulatory Responsibility as provided hereby or for the failure to provide any such Responsibility, except with respect to such liability, loss or damages as shall have been suffered by one or more of the Participants and caused by the willful misconduct of one or more of the other participants or their respective directors, governors, officers, employees or representatives. No warranties, express or implied, are made by any or all of the Participants or the Council with respect to any Regulatory Responsibility to be performed by each of them hereunder. Relief From Responsibility Pursuant to Section 17(d)(1)(A) of the Securities Exchange Act of 1934 and Rule 17d–2 promulgated pursuant thereto, the Participants join in requesting the Securities and Exchange Commission, upon its approval of this Agreement or any part thereof, to relieve those Participants which are from time to time participants in this Agreement which are not the DOEA as to a Common Member of any and all Regulatory Responsibility with respect to the matters allocated to the DOEA. Exhibit A—Rules Enforced Under 17d– 2 Agreement Opening of Accounts AMEX Rules 411, 921 and 1101 CBOE Rule 9.7 ISE Rule 608 FINRA NASD Rules 2860(b)(16), IM– 2860–2 & 2843 NYSE Rule 721 PHLX Rule 1024(b) NYSE ARCA Rule 9.2(a) and Rule 9.18(b) BSE/BOX Chapter XI, Section 9 NASDAQ Chapter XI, Section 7 Supervision AMEX Rules 411, 922 & 1104 CBOE Rule 9.8 ISE Rule 609 FINRA NASD Rules 2860(b)(20), 2860(b)(17)(B), 2846 & 2849 NYSE Rule 722 PHLX Rule 1025 NYSE ARCA Rule 9.2(b) BSE/BOX Chapter XI, Section 10 NASDAQ Chapter XI, Section 8 Suitability AMEX Rules 923 & 1102 CBOE Rule 9.9 ISE Rule 610 FINRA NASD Rule 2860(b)(19) & 2844 NYSE Rule 723 PHLX Rule 1026 NYSE ARCA Rule 9.18(c) BSE/BOX Chapter XI, Section 11 E:\FR\FM\18MRN1.SGM 18MRN1 Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Notices NASDAQ PHLX Rule 1043 NYSE ARCA Rule 6.25(a) BSE/BOX Chapter VII, Section 2 NASDAQ Chapter VIII, Section 2 Chapter XI, Section 9 Discretionary Accounts AMEX Rules 421, 924 & 1103 CBOE Rule 9.10 ISE Rule 611 FINRA NASD Rules 2860(b)(18) & 2845 NYSE Rules 724 & 414 PHLX Rule 1027 NYSE ARCA Rule 9.18(e) BSE/BOX Chapter XI, Section 12 NASDAQ Chapter XI, Section 10 Disclosure Documents AMEX Rules 932 and 1105 CBOE Rule 9.23 ISE Rule 625 FINRA NASD Rules 2860(b)(17)(A), 3070(a) & (c) & 2847 NYSE Rules 732 & 351(a) and (d) PHLX Rule 1070 NYSE ARCA Rule 9.18(I) BSE/BOX Chapter XI, Section 26 NASDAQ Chapter XI, Section 24 AMEX Rules 419 and 930 CBOE Rule 9.12 ISE Rules 613 and 614 FINRA NASD Rule 2860(b)(15) NYSE Rules 730 & 409(a) PHLX Rule 1032 NYSE ARCA Rule 9.18(j) BSE/BOX Chapter XI, Sections 14 and 15 NASDAQ Chapter XI, Sections 12 and 13 mstockstill on PROD1PC66 with NOTICES AMEX Rule 981 CBOE Rule 11.2 ISE Rule 1101 FINRA NASD Rule 2860(b)(23) NYSE Rule 781 VerDate Aug<31>2005 17:39 Mar 17, 2008 Jkt 214001 • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/other.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number S7–966 on the subject line. Prohibition Against Guarantees Customer Statements Allocation of Exercise Assignment Notices Electronic Comments AMEX Rule 320 CBOE Rule 9.6 ISE Rule 607 FINRA NASD Rule 2860(b)(20)(c) & 2846 NYSE Rule 722(d) PHLX Rule 602 NYSE ARCA Rule 9.18(m) BSE/BOX Chapter XI, Section 8 NASDAQ Chapter XI, Section 6 Customer Complaints IV. Solicitation of Comments Branch Offices of Member Organizations AMEX Rules 480, 481, 991 & 1106 CBOE Rule 9.21 ISE Rule 623 FINRA NASD Rules 2220 & 2848 NYSE Rule 791 PHLX Rule 1049 NYSE ARCA Rule 9.22(a) BSE/BOX Chapter XI, Section 24 NASDAQ Chapter XI, Section 22 AMEX Rule 925 CBOE Rule 9.11 ISE Rule 612 FINRA NASD Rule 2860(b)(12) NYSE Rules 725 & 409(b) PHLX Rule 1028 NYSE ARCA Rule 9.18(f) BSE/BOX Chapter XI, Section 13 NASDAQ Chapter XI, Section 11 NYSE Rule 345 PHLX Rule 1024 NYSE ARCA Rule 9.27(a) BSE/BOX Chapter XI, Section 3 NASDAQ Chapter XI, Section 3 AMEX Rules 921 and 926 CBOE Rule 9.15 ISE Rule 616 FINRA NASD Rule 2860(b)(11) NYSE Rule 726 (a) and (c) PHLX Rule 1024(b)(v), 1029 NYSE ARCA Rule 9.18(g) BSE/BOX Chapter XI, Section 17 NASDAQ Chapter XI, Section 15 Customer Communications (Advertising) Confirmations 14511 AMEX Rule 341 CBOE Rule 9.18 ISE Rules 619 and 620 FINRA NASD Rule 2330(e) NYSE Rule 352(a) PHLX Rule 777 NYSE ARCA Rule 9.1(e) BSE/BOX Chapter XI, Sections 20 and 21 NASDAQ Chapter XI, Sections 18 and 19 Assuming Losses AMEX Rule 16 CBOE Rule 9.19 ISE Rule 621 FINRA NASD Rule 2330(f) NYSE Rules 352 (b) and (c) PHLX Rule 777 NYSE ARCA Rule 9.1(f) BSE/BOX Chapter XI, Section 22 NASDAQ Chapter XI, Section 20 Registration of ROP AMEX Rule 920 CBOE Rule 9.2 ISE Rule 601 FINRA NASD Rules 1022(f) & IM– 1022–1 NYSE Rule 720 PHLX Rule 1024 NYSE ARCA Rule 9.26 BSE/BOX Chapter XI, Section 2 NASDAQ Chapter XI, Section 2 Certification of Registered Personnel Amex Rule 920 CBOE Rule 9.3 ISE Rule 602 FINRA NASD Rule 1032(d) PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 In order to assist the Commission in determining whether to approve the 17d–2 plan, interested persons are invited to submit written data, views, and arguments concerning the foregoing. Comments may be submitted by any of the following methods: Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number S7–966. 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/other.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed plan that are filed with the Commission, and all written communications relating to the proposed plan 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, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the plan also will be available for inspection and copying at the principal offices of Amex, BSE, CBOE, ISE, FINRA, NASDAQ, NYSE, NYSE Arca, and the Phlx. 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 S7–966 and should be submitted on or before April 7, 2008. E:\FR\FM\18MRN1.SGM 18MRN1 14512 Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Notices mstockstill on PROD1PC66 with NOTICES V. Discussion The Commission continues to believe that the proposed plan is an achievement in cooperation among the SRO participants, and will reduce unnecessary regulatory duplication by allocating to the designated SRO the responsibility for certain options-related sales practice matters that would otherwise be performed by multiple SROs. The plan promotes efficiency by reducing costs to firms that are members of more than one of the SRO participants. In addition, because the SRO participants coordinate their regulatory functions in accordance with the plan, the plan promotes, and will continue to promote, investor protection. Under paragraph (c) of Rule 17d–2, the Commission may, after appropriate notice and comment, declare a plan, or any part of a plan, effective. In this instance, the Commission believes that appropriate notice and comment can take place after the proposed amendment is effective. The primary purpose of the amendment is to add NASDAQ as an SRO participant and to reflect the name change of NASD to FINRA. By declaring it effective today, the amended plan can become effective and be implemented concurrently with the Commission’s approval of NASDAQ’s new options facility, the NASDAQ Options Market.16 In addition, the Commission notes that the prior version of this plan immediately prior to this proposed amendment was published for comment and the Commission did not receive any comments thereon.17 Finally, the Commission does not believe that the amendment to the plan raises any new regulatory issues that the Commission has not previously considered. VI. Conclusion This order gives effect to the amended plan submitted to the Commission that is contained in File No. S7–966. It is therefore ordered, pursuant to Section 17(d) of the Act,18 that the amended plan dated December 27, 2007 by and between the Amex, BSE, CBOE, ISE, FINRA, NASDAQ, NYSE, NYSE Arca, and Phlx filed pursuant to Rule 17d–2 is hereby approved and declared effective. It is further ordered that those SRO participants that are not the DOEA as to a particular common member are 16 See Securities Exchange Act Release No. 57478 (March 12, 2008) (SR–NASDAQ–2007–004) (SR– NASDAQ–2007–080). 17 See supra note 15 (citing to Securities Exchange Act Release No. 55532). 18 15 U.S.C. 78q(d). VerDate Aug<31>2005 17:39 Mar 17, 2008 Jkt 214001 relieved of those regulatory responsibilities allocated to the common member’s DOEA under the amended plan to the extent of such allocation. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Nancy M. Morris, Secretary. [FR Doc. E8–5321 Filed 3–17–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57483; File No. SR–Amex– 2008–22] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Widen the Spread Tolerances and Eliminate the Momentum Tolerances Built Into the AEMI System March 12, 2008. 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 March 11, 2008, 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 and II below, which Items have been prepared substantially by the Amex. The Amex has submitted the proposed rule change under Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6) thereunder,4 which renders the proposal effective upon filing with 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 The Amex proposes to amend Amex Rules 1A—AEMI, ‘‘Applicability, Definitions, References and Phase-In,’’ and 128A—AEMI, ‘‘Automatic Execution,’’ to reflect the widening of the spread tolerances and the elimination of the momentum tolerances built into the AEMI system. The Amex believes that these changes are necessary to enable the automated execution of orders and quotes (‘‘AutoEx’’) to occur more continuously on the 19 17 CFR 200.30–3(a)(34). 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). 1 15 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 Exchange, without unnecessary interruption. The text of the proposed rule change is available at http://www.amex.com, the principal office of the Amex, and the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the 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 III below. The 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 Spread and momentum tolerances are built into AEMI whereby if the difference in price of any two consecutive executions (spread) or velocity of price changes over a specific time window (momentum) in any particular security exceed certain thresholds—a ‘‘breach’’—Auto-Ex is disabled in that security.5 Upon a breach, an Amex specialist would conduct an intra-day pair-off before Auto-Ex is restored. The Amex now believes that the tolerances, in their current form, are no longer essential to the proper functioning of an automated market, given that Regulation NMS 6 ensures price protection for automated quotations in other market centers that are priced better than the Amex top of book. Further, the Amex believes that the tolerances in their current form have not necessarily been effective in dampening price volatility (in contrast to Amex specialists’ obligations to maintain reasonable depth with price continuity). The Amex also notes that its competitors, Nasdaq and NYSE Arca, do not impose such limitations on AutoEx in their markets.7 Accordingly, the Amex believes that the time has come to modify its systems so that Auto-Ex can occur more continuously, without 5 See Rule 128A—AEMI(f)(i)–(ii). CFR 242.600 et seq. 7 The Amex states that New York Stock Exchange Rule 1000(a)(iv) specifies that Auto-Ex will disable when a ‘‘liquidity replenishment point’’ is reached. According to the Amex, a liquidity replenishment point is a type of spread tolerance. The Amex states, further, that the NYSE does not have anything equivalent to a momentum tolerance. 6 17 E:\FR\FM\18MRN1.SGM 18MRN1

Agencies

[Federal Register Volume 73, Number 53 (Tuesday, March 18, 2008)]
[Notices]
[Pages 14507-14512]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-5321]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57481; File No. S7-966]


Program for Allocation of Regulatory Responsibilities Pursuant to 
Rule 17d-2; Notice of Filing and Order Approving and Declaring 
Effective an Amendment to the Plan for the Allocation of Regulatory 
Responsibilities Among the American Stock Exchange LLC, the Boston 
Stock Exchange, Inc., the Chicago Board Options Exchange, Incorporated, 
the International Securities Exchange, LLC, Financial Industry 
Regulatory Authority, Inc., The NASDAQ Stock Market LLC, the New York 
Stock Exchange, LLC, NYSE Arca, Inc., and the Philadelphia Stock 
Exchange, Inc.

March 12, 2008.
    Notice is hereby given that the Securities and Exchange Commission 
(``Commission'') has issued an Order, pursuant to Section 17(d) of the 
Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring 
effective an amendment to the plan for allocating regulatory 
responsibility filed pursuant to Rule 17d-2 of the Act,\2\ by the 
American Stock Exchange LLC (``Amex''), the Boston Stock Exchange, Inc. 
(``BSE''), the Chicago Board Options Exchange, Incorporated (``CBOE''), 
the International Securities Exchange, LLC (``ISE''), Financial 
Industry Regulatory Authority, Inc. (``FINRA''), The NASDAQ Stock 
Market LLC (``NASDAQ''), the New York Stock Exchange (``NYSE''), NYSE 
Arca, Inc. (``NYSE Arca''), and the Philadelphia Stock Exchange, Inc. 
(``Phlx'') (collectively, ``SRO participants'').
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78q(d).
    \2\ 17 CFR 240.17d-2.
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I. Introduction

    Section 19(g)(1) of the Act,\3\ among other things, requires every 
self-regulatory organization (``SRO'') registered as either a national 
securities exchange or national 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)\4\ or Section 19(g)(2)\5\ of the Act. Without 
this relief, the statutory obligation of each individual SRO could 
result in a pattern of multiple examinations of broker-dealers that 
maintain memberships in more than one SRO (``common members''). Such 
regulatory duplication would add unnecessary expenses for common 
members and their SROs.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78s(g)(1).
    \4\ 15 U.S.C. 78q(d).
    \5\ 15 U.S.C. 78s(g)(2).
---------------------------------------------------------------------------

    Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate 
unnecessary multiple examinations and regulatory duplication.\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.
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    \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).
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    To implement Section 17(d)(1), the Commission adopted two rules: 
Rule 17d-1 and Rule 17d-2 under the Act.\8\ 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.\9\ When an SRO has been named as a common member's DEA, all 
other SROs to which the common member belongs are relieved of the 
responsibility to examine the firm for compliance with the applicable 
financial responsibility rules. On its face, Rule 17d-1 deals only with 
an SRO's obligations to enforce member compliance with financial 
responsibility requirements. Rule 17d-1 does not relieve an SRO from 
its obligation to examine a common member for compliance with its own 
rules and provisions of the federal securities laws governing matters 
other than financial responsibility, including

[[Page 14508]]

sales practices and trading activities and practices.
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    \8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
    \9\ See Securities Exchange Act Release No. 12352 (April 20, 
1976), 41 FR 18808 (May 7, 1976).
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    To address regulatory duplication in these and other areas, the 
Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits 
SROs to propose joint plans for the allocation of regulatory 
responsibilities 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. 
Commission approval of a plan filed pursuant to Rule 17d-2 relieves an 
SRO of those regulatory responsibilities allocated by the plan to 
another SRO.
---------------------------------------------------------------------------

    \10\ See Securities Exchange Act Release No. 12935 (October 28, 
1976), 41 FR 49091 (November 8, 1976).
---------------------------------------------------------------------------

II. The Plan

    On September 8, 1983, the Commission approved the SRO participants' 
plan for allocating regulatory responsibilities pursuant to Rule 17d-
2.\11\ On May 23, 2000, the Commission approved an amendment to the 
plan that added the ISE as a participant.\12\ On November 8, 2002, the 
Commission approved another amendment that replaced the original plan 
in its entirety and, among other things, allocated regulatory 
responsibilities among all the participants in a more equitable 
manner.\13\ On February 5, 2004, the parties submitted an amendment to 
the plan, primarily to include the BSE, which was establishing a new 
options trading facility to be known as the Boston Options Exchange 
(``BOX''), as an SRO participant.\14\ On December 5, 2007, the parties 
submitted an amendment to the plan to, among other things, provide that 
the National Association of Securities Dealers (``NASD'') (n/k/a the 
Financial Industry Regulatory Authority, Inc. or ``FINRA'') and NYSE 
are Designated Options Examining Authorities under the plan.\15\
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    \11\ See Securities Exchange Act Release No. 20158 (September 8, 
1983), 48 FR 41256 (September 14, 1983).
    \12\ See Securities Exchange Act Release No. 42816 (May 23, 
2000), 65 FR 34759 (May 31, 2000).
    \13\ See Securities Exchange Act Release No. 46800 (November 8, 
2002), 67 FR 69774 (November 19, 2002).
    \14\ See Securities Exchange Act Release No. 49197 (February 5, 
2004), 69 FR 7046 (February 12, 2004).
    \15\ See Securities Exchange Act Release No. 55532 (March 26, 
2007), 72 FR 15729 (April 2, 2007).
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    The plan reduces regulatory duplication for a large number of firms 
currently members of two or more of the SRO participants by allocating 
regulatory responsibility for certain options-related sales practice 
matters to one of the SRO participants. Generally, under the current 
plan, the SRO participant responsible for conducting options-related 
sales practice examinations of a firm, and investigating options-
related customer complaints and terminations for cause of associated 
persons of that firm, is known as the firm's ``Designated Options 
Examining Authority'' (``DOEA''). Pursuant to the current plan, any 
other SRO of which the firm is a member is relieved of these 
responsibilities during the period in which the firm is assigned to 
another SRO acting as that firm's DOEA.

III. Proposed Amendment to the Plan

    On December 27, 2007, the parties submitted a proposed amendment to 
the plan. The primary purpose of the amendment is to add NASDAQ as an 
SRO participant and to reflect the name change of NASD to FINRA. The 
amended agreement replaces the previous agreement in its entirety. The 
text of the proposed amended 17d-2 plan is as follows (additions are 
italicized; deletions are [bracketed]):
* * * * *
    Agreement by and among the American Stock Exchange, LLC, the Boston 
Stock Exchange, Inc., the Chicago Board Options Exchange, Inc., the 
International Securities Exchange, LLC, Financial Industry Regulatory 
Authority [the National Association of Securities Dealers], Inc., the 
New York Stock Exchange, LLC, the NYSE Arca Inc., The NASDAQ Stock 
Market LLC, and the Philadelphia Stock Exchange, Inc., Pursuant to Rule 
17d-2 under the Securities Exchange Act of 1934.
    This agreement (``Agreement''), by and among the American Stock 
Exchange, LLC, the Boston Stock Exchange, Inc., the Chicago Board 
Options Exchange, Inc., the International Securities Exchange, LLC, 
Financial Industry Regulatory Authority [the National Association of 
Securities Dealers], Inc. (``FINRA[NASD]''), The NASDAQ Stock Market 
LLC (``NASDAQ''), the New York Stock Exchange, LLC (``NYSE''), the NYSE 
Arca, Inc., and the Philadelphia Stock Exchange, Inc., hereinafter 
collectively referred to as the Participants, is made this 
27\th\[1\st\] day of December, 2007[6], pursuant to the provisions of 
Rule 17d-2 under the Securities Exchange Act of 1934 (the ``Exchange 
Act''), which allows for plans among self-regulatory organizations to 
allocate regulatory responsibility. This Agreement shall be 
administered by a committee known as the Options Self-Regulatory 
Council (the ``Council'').
    This Agreement amends and restates the agreement entered into among 
the Participants on December 1, 2006, entitled ``Agreement by and among 
the American Stock Exchange, LLC, the Boston Stock Exchange, Inc., the 
Chicago Board Options Exchange, Inc., the International Securities 
Exchange, LLC, National Association of Securities Dealers, Inc., the 
New York Stock Exchange, LLC, the NYSE Arca Inc., and the Philadelphia 
Stock Exchange, Inc., Pursuant to Rule 17d-2 under the Securities 
Exchange Act of 1934.''
    Whereas, the Participants are desirous of allocating regulatory 
responsibilities with respect to broker-dealers, and persons associated 
therewith, that are members[dagger] 1 of more than one 
Participant (the ``Common Members'') and conduct a public business for 
compliance with Common Rules (as hereinafter defined) relating to the 
conduct by broker-dealers of accounts for listed options, index 
warrants, currency index warrants and currency warrants (collectively, 
``Covered Securities''); and
---------------------------------------------------------------------------

    \[dagger] 1\ In the case of the Boston Stock Exchange, Inc., and 
NASDAQ members are those persons who are options participants (as 
defined in the BOX and NASDAQ Options Market Rules).
---------------------------------------------------------------------------

    Whereas, the Participants are desirous of executing a plan for this 
purpose pursuant to the provisions of Rule 17d-2 and filing such plan 
with the Securities and Exchange Commission (``SEC'' or the 
``Commission'') for its approval;
    Now, therefore, in consideration of the mutual covenants contained 
hereafter, the Participants agree as follows:
    I. As used herein the term Designated Options Examining Authority 
(``DOEA'') shall mean FINRA[NASD] and NYSE insofar as each shall 
perform Regulatory Responsibility (as hereinafter defined) for its 
broker-dealer members that also are members of another Participant, and 
allocated to it in accordance with the terms hereof. The Designated 
Examination Authority (``DEA'') pursuant to SEC Rule 17d-1 under the 
Securities Exchange Act (``Rule 17d-1'') for a broker-dealer that is a 
member of a more than one Participant (but not a member of a DOEA) 
shall perform the Regulatory Responsibility under the

[[Page 14509]]

Agreement as if such DEA were the DOEA.
    II. As used herein, the term ``Regulatory Responsibility'' shall 
mean the examination and enforcement responsibilities relating to 
compliance by broker-dealers that are members of more than one 
Participant (the ``Common Members'') with the rules of the applicable 
Participant that are substantially similar to the rules of the other 
Participants (the ``Common Rules''), insofar as they apply to the 
conduct of accounts for Covered Securities. A list of the current 
Common Rules of each Participant applicable to the conduct of accounts 
for Covered Securities is attached hereto as Exhibit A. Each year 
within 30 days of the anniversary date of the commencement of operation 
of this Agreement, each Participant shall submit in writing to each 
DOEA and DEA performing as a DOEA for any members of such Participant 
any revisions to Exhibit A reflecting changes in the rules of the 
Participant or DOEAs, and confirm that all other rules of the 
Participant listed in Exhibit A continue to meet the definition of 
Common Rules as defined in this Agreement. Within 30 days from the date 
that each DOEA has received revisions and/or confirmation that no 
change has been made to Exhibit A from all Participants, the DOEAs 
shall confirm in writing to each Participant whether the rules listed 
in any updated Exhibit A are Common Rules as defined in this Agreement. 
Notwithstanding anything herein to the contrary, it is explicitly 
understood that the term ``Regulatory Responsibility'' does not 
include, and each of the Participants shall (unless allocated pursuant 
to Rule 17d-2 otherwise than under this Agreement) retain full 
responsibility for, each of the following:
    (a) Surveillance and enforcement with respect to trading activities 
or practices involving its own marketplace, including without 
limitation its rules relating to the rights and obligations of 
specialists and other market makers;
    (b) Registration pursuant to its applicable rules of associated 
persons;
    (c) Discharge of its duties and obligations as a DEA; and
    (d) Evaluation of advertising, responsibility for which shall 
remain with the Participant to which a Common Member submits same for 
approval.
    III. Apparent violations of another Participant's rules discovered 
by a DOEA, but which rules are not within the scope of the discovering 
DOEA's Regulatory Responsibility, shall be referred to the relevant 
Participant for such action as the Participant to which such matter has 
been referred deems appropriate. Notwithstanding the foregoing, nothing 
contained herein shall preclude a DOEA in its discretion from 
requesting that another Participant conduct an enforcement proceeding 
on a matter for which the requesting DOEA has Regulatory 
Responsibility. If such other Participants agree, the Regulatory 
Responsibility in such case shall be deemed transferred to the 
accepting Participant. Each Participant agrees, upon request, to make 
available promptly all relevant files, records and/or witnesses 
necessary to assist another Participant in an investigation or 
enforcement proceeding.
    IV. The Council shall be composed of one representative designated 
by each of the Participants. Each Participant shall also designate one 
or more persons as its alternate representative(s). In the absence of 
the representative of a Participant, such alternate representative 
shall have the same powers, duties and responsibilities as the 
representative. Each Participant may, at any time, by notice to the 
then Chair of the Council, replace its representative and/or its 
alternate representative on such Council. A majority of the Council 
shall constitute a quorum and, unless specifically otherwise required, 
the affirmative vote of a majority of the Council members present (in 
person, by telephone or by written consent) shall be necessary to 
constitute action by the Council. From time to time, the Council shall 
elect one member from the DOEAs to serve as Chair and another from the 
Council to serve as Vice Chair (to substitute for the Chair in the 
event of his or her unavailability at a meeting of the Council). All 
notices and other communications for the Council shall be sent to it in 
care of the Chair or to each of the representatives.
    V. The Council shall determine the times and locations of Council 
meetings, provided that the Chair, acting alone, may also call a 
meeting of the Council in the event the Chair determines that there is 
good cause to do so. To the extent reasonably possible, notice of any 
meeting shall be given at least ten-business days prior thereto. 
Notwithstanding anything herein to the contrary, representatives shall 
always be given the option of participating in any meeting 
telephonically at their own expense rather than in person.
    VI. For the purpose of fulfilling the Participants' Regulatory 
Responsibilities, the DOEAs shall allocate Common Members that conduct 
a public business in Covered Securities among DOEAs from time to time 
in such manner as the DOEAs deem appropriate, provided that any such 
allocation shall be based on the following principles except to the 
extent affected DOEAs consent:
    (a) The DOEAs may not allocate a member to a DOEA unless the member 
is a member of that DOEA, nor shall any member be allocated to a 
Participant that is not a DOEA or DEA acting as a DOEA.
    (b) To the extent practical and desired by the DOEAs, Common 
Members that conduct a public business in Covered Securities shall be 
allocated among the DOEAs of which they are members in such manner as 
to equalize as nearly as possible the allocation of such Common Members 
among such DOEAs.
    (c) To the extent practical and desired by the DOEAs, the 
allocation of Common Members shall take into account the amount of 
customer activity conducted by each member in Covered Securities such 
that Common Members shall be allocated among the DOEAs of which they 
are members in such manner as most evenly divides the Common Members 
with the largest amount of customer activity among such DOEAs.
    (d) The DOEAs shall make general reallocations of Common Members 
from time-to-time, as it deems appropriate.
    (e) All Participants shall promptly notify the DOEAs no later than 
the next scheduled meeting of any change in membership of Common 
Members. Whenever a Common Member ceases to be a member of its DOEA, 
that DOEA shall promptly inform the other DOEAs, which will promptly 
review the matter and reallocate the Common Member to the extent 
practical.
    (f) A DOEA may request that a Common Member that is allocated to it 
be reallocated to another DOEA by giving thirty days written notice 
thereof. The DOEAs in their discretion may approve such request and 
reallocate such Common Member to another DOEA.
    (g) All determinations by the DOEAs with respect to allocations, if 
there are more than two DOEAs, shall be by the affirmative vote of a 
majority of the DOEAs of which such firm is a Common Member, otherwise 
by negotiation and consensus.
    VII. Each DOEA shall conduct an examination of each Common Member 
allocated to it on a cycle not less frequently than agreed upon by all 
DOEAs. The other Participants agree that, upon request, relevant 
information in their respective files relative to a Common Member will 
be made available to the applicable DOEA. At each meeting of the 
Council, each DOEA shall be prepared to report on the status

[[Page 14510]]

of its examination program for the previous quarter and any period 
prior thereto that has not previously been reported to the Council. In 
the event a DOEA believes it will not be able to complete the 
examination cycle for its allocated firms, it will so advise the 
Council. The DOEAs may undertake to remedy this situation by 
reallocating selected firms or lengthening the cycles for selected 
firms, with the approval of all other DOEAs.
    VIII. Each DOEA will promptly furnish a copy of the Examination 
report, relating to Covered Securities, of any examination made 
pursuant to the provisions of this Agreement to each other Participant 
of which the Common Member examined is a member.
    IX. Each DOEA's Regulatory Responsibility shall for each Common 
Member allocated to it include investigations into terminations ``for 
cause'' of associated persons relating to Covered Securities, unless 
such termination is related solely to another Participant's market. In 
the latter instance, that Participant to whose market the termination 
for cause relates shall discharge Regulatory Responsibility with 
respect to such termination for cause. In connection with a DOEA's 
examination, investigation and/or enforcement proceeding regarding a 
Covered Security-related termination for cause, the other Participants 
of which the Common Member is a member shall furnish, upon request, 
copies of all pertinent materials related thereto in their possession. 
As used in this Section, ``for cause'' shall include, without 
limitation, terminations characterized on Form U5 under the label 
``Permitted to Resign,'' ``Discharge'' or ``Other.''
    X. Each DOEA shall discharge the Regulatory Responsibility for each 
Common Member allocated to it relative to a Covered Securities-related 
customer complaint [dagger] 2 unless such complaint is 
uniquely related to another Participant's market. In the latter 
instance, the DOEA shall forward the matter to that Participant to 
whose market the matter relates, and the latter shall discharge 
Regulatory Responsibility with respect thereto. If a Participant 
receives a customer complaint for a Common Member related to a Covered 
Security for which the Participant is not the DOEA, the Participant 
shall promptly forward a copy of such complaint to the DOEA.
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    \[dagger] 2\ For purposes of complaints, they can be reported 
pursuant to Form U4, Form U5 or RE-3 and any amendments thereto.
---------------------------------------------------------------------------

    XI. Any written notice required or permitted to be given under this 
Agreement shall be deemed given if sent by certified mail, return 
receipt requested, or by a comparable means of electronic communication 
to each Participant entitled to receipt thereof, to the attention of 
the Participant's representative on the Council at the Participant's 
then principal office or by e-mail at such address as the 
representative shall have filed in writing with the Chair.
    XII. The Participants shall notify the Common Members of this 
Agreement by means of a uniform joint notice approved by the Council.
    XIII. This Agreement may be amended in writing duly approved by 
each Participant.
    XIV. Any of the Participants may manifest its intention to cancel 
its participation in this Agreement at any time by giving the Council 
written notice thereof at least 90 days prior to the effective date of 
such cancellation. Upon receipt of such notice the Council shall 
allocate, in accordance with the provisions of this Agreement, any 
Common Members for which the petitioning party was the DOEA. Until such 
time as the Council has completed the reallocation described above; the 
petitioning Participant shall retain all its rights, privileges, duties 
and obligations hereunder.
    XV. The cancellation of its participation in this Agreement by any 
Participant shall not terminate this Agreement as to the remaining 
Participants. This Agreement will only terminate following notice to 
the Commission, in writing, by the then Participants that they intend 
to terminate the Agreement and the expiration of the applicable notice 
period. Such notice shall be given at least six months prior to the 
intended date of termination, provided that in the event a notice of 
cancellation is received from a Participant that, assuming the 
effectiveness thereof, would result in there being just one remaining 
member of the Council, notice to the Commission of termination of this 
Agreement shall be given promptly upon the receipt of such notice of 
cancellation, which termination shall be effective upon the 
effectiveness of the cancellation that triggered the notice of 
termination to the Commission.
Limitation of Liability
    No Participant nor the Council nor any of their respective 
directors, governors, officers, employees or representatives shall be 
liable to any other Participant in this Agreement for any liability, 
loss or damage resulting from or claimed to have resulted from any 
delays, inaccuracies, errors or omissions with respect to the provision 
of Regulatory Responsibility as provided hereby or for the failure to 
provide any such Responsibility, except with respect to such liability, 
loss or damages as shall have been suffered by one or more of the 
Participants and caused by the willful misconduct of one or more of the 
other participants or their respective directors, governors, officers, 
employees or representatives. No warranties, express or implied, are 
made by any or all of the Participants or the Council with respect to 
any Regulatory Responsibility to be performed by each of them 
hereunder.
Relief From Responsibility
    Pursuant to Section 17(d)(1)(A) of the Securities Exchange Act of 
1934 and Rule 17d-2 promulgated pursuant thereto, the Participants join 
in requesting the Securities and Exchange Commission, upon its approval 
of this Agreement or any part thereof, to relieve those Participants 
which are from time to time participants in this Agreement which are 
not the DOEA as to a Common Member of any and all Regulatory 
Responsibility with respect to the matters allocated to the DOEA.
Exhibit A--Rules Enforced Under 17d-2 Agreement Opening of Accounts
AMEX Rules 411, 921 and 1101
CBOE Rule 9.7
ISE Rule 608
FINRA NASD Rules 2860(b)(16), IM-2860-2 & 2843
NYSE Rule 721
PHLX Rule 1024(b)
NYSE ARCA Rule 9.2(a) and Rule 9.18(b)
BSE/BOX Chapter XI, Section 9
NASDAQ Chapter XI, Section 7
Supervision
AMEX Rules 411, 922 & 1104
CBOE Rule 9.8
ISE Rule 609
FINRA NASD Rules 2860(b)(20), 2860(b)(17)(B), 2846 & 2849
NYSE Rule 722
PHLX Rule 1025
NYSE ARCA Rule 9.2(b)
BSE/BOX Chapter XI, Section 10
NASDAQ Chapter XI, Section 8
Suitability
AMEX Rules 923 & 1102
CBOE Rule 9.9
ISE Rule 610
FINRA NASD Rule 2860(b)(19) & 2844
NYSE Rule 723
PHLX Rule 1026
NYSE ARCA Rule 9.18(c)
BSE/BOX Chapter XI, Section 11

[[Page 14511]]

NASDAQ Chapter XI, Section 9
Discretionary Accounts
AMEX Rules 421, 924 & 1103
CBOE Rule 9.10
ISE Rule 611
FINRA NASD Rules 2860(b)(18) & 2845
NYSE Rules 724 & 414
PHLX Rule 1027
NYSE ARCA Rule 9.18(e)
BSE/BOX Chapter XI, Section 12
NASDAQ Chapter XI, Section 10
Customer Communications (Advertising)
AMEX Rules 480, 481, 991 & 1106
CBOE Rule 9.21
ISE Rule 623
FINRA NASD Rules 2220 & 2848
NYSE Rule 791
PHLX Rule 1049
NYSE ARCA Rule 9.22(a)
BSE/BOX Chapter XI, Section 24
NASDAQ Chapter XI, Section 22
Customer Complaints
AMEX Rules 932 and 1105
CBOE Rule 9.23
ISE Rule 625
FINRA NASD Rules 2860(b)(17)(A), 3070(a) & (c) & 2847
NYSE Rules 732 & 351(a) and (d)
PHLX Rule 1070
NYSE ARCA Rule 9.18(I)
BSE/BOX Chapter XI, Section 26
NASDAQ Chapter XI, Section 24
Customer Statements
AMEX Rules 419 and 930
CBOE Rule 9.12
ISE Rules 613 and 614
FINRA NASD Rule 2860(b)(15)
NYSE Rules 730 & 409(a)
PHLX Rule 1032
NYSE ARCA Rule 9.18(j)
BSE/BOX Chapter XI, Sections 14 and 15
NASDAQ Chapter XI, Sections 12 and 13
Confirmations
AMEX Rule 925
CBOE Rule 9.11
ISE Rule 612
FINRA NASD Rule 2860(b)(12)
NYSE Rules 725 & 409(b)
PHLX Rule 1028
NYSE ARCA Rule 9.18(f)
BSE/BOX Chapter XI, Section 13
NASDAQ Chapter XI, Section 11
Allocation of Exercise Assignment Notices
AMEX Rule 981
CBOE Rule 11.2
ISE Rule 1101
FINRA NASD Rule 2860(b)(23)
NYSE Rule 781
PHLX Rule 1043
NYSE ARCA Rule 6.25(a)
BSE/BOX Chapter VII, Section 2
NASDAQ Chapter VIII, Section 2
Disclosure Documents
AMEX Rules 921 and 926
CBOE Rule 9.15
ISE Rule 616
FINRA NASD Rule 2860(b)(11)
NYSE Rule 726 (a) and (c)
PHLX Rule 1024(b)(v), 1029
NYSE ARCA Rule 9.18(g)
BSE/BOX Chapter XI, Section 17
NASDAQ Chapter XI, Section 15
Branch Offices of Member Organizations
AMEX Rule 320
CBOE Rule 9.6
ISE Rule 607
FINRA NASD Rule 2860(b)(20)(c) & 2846
NYSE Rule 722(d)
PHLX Rule 602
NYSE ARCA Rule 9.18(m)
BSE/BOX Chapter XI, Section 8
NASDAQ Chapter XI, Section 6
Prohibition Against Guarantees
AMEX Rule 341
CBOE Rule 9.18
ISE Rules 619 and 620
FINRA NASD Rule 2330(e)
NYSE Rule 352(a)
PHLX Rule 777
NYSE ARCA Rule 9.1(e)
BSE/BOX Chapter XI, Sections 20 and 21
NASDAQ Chapter XI, Sections 18 and 19
Assuming Losses
AMEX Rule 16
CBOE Rule 9.19
ISE Rule 621
FINRA NASD Rule 2330(f)
NYSE Rules 352 (b) and (c)
PHLX Rule 777
NYSE ARCA Rule 9.1(f)
BSE/BOX Chapter XI, Section 22
NASDAQ Chapter XI, Section 20
Registration of ROP
AMEX Rule 920
CBOE Rule 9.2
ISE Rule 601
FINRA NASD Rules 1022(f) & IM-1022-1
NYSE Rule 720
PHLX Rule 1024
NYSE ARCA Rule 9.26
BSE/BOX Chapter XI, Section 2
NASDAQ Chapter XI, Section 2
Certification of Registered Personnel
Amex Rule 920
CBOE Rule 9.3
ISE Rule 602
FINRA NASD Rule 1032(d)
NYSE Rule 345
PHLX Rule 1024
NYSE ARCA Rule 9.27(a)
BSE/BOX Chapter XI, Section 3
NASDAQ Chapter XI, Section 3

IV. Solicitation of Comments

    In order to assist the Commission in determining whether to approve 
the 17d-2 plan, interested persons are invited to submit written data, 
views, and arguments concerning the foregoing. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/other.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number S7-966 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number S7-966. 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/other.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed plan that are filed with the 
Commission, and all written communications relating to the proposed 
plan 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, on official business days between 
the hours of 10 a.m. and 3 p.m. Copies of the plan also will be 
available for inspection and copying at the principal offices of Amex, 
BSE, CBOE, ISE, FINRA, NASDAQ, NYSE, NYSE Arca, and the Phlx. 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 S7-966 and should be submitted 
on or before April 7, 2008.

[[Page 14512]]

V. Discussion

    The Commission continues to believe that the proposed plan is an 
achievement in cooperation among the SRO participants, and will reduce 
unnecessary regulatory duplication by allocating to the designated SRO 
the responsibility for certain options-related sales practice matters 
that would otherwise be performed by multiple SROs. The plan promotes 
efficiency by reducing costs to firms that are members of more than one 
of the SRO participants. In addition, because the SRO participants 
coordinate their regulatory functions in accordance with the plan, the 
plan promotes, and will continue to promote, investor protection.
    Under paragraph (c) of Rule 17d-2, the Commission may, after 
appropriate notice and comment, declare a plan, or any part of a plan, 
effective. In this instance, the Commission believes that appropriate 
notice and comment can take place after the proposed amendment is 
effective. The primary purpose of the amendment is to add NASDAQ as an 
SRO participant and to reflect the name change of NASD to FINRA. By 
declaring it effective today, the amended plan can become effective and 
be implemented concurrently with the Commission's approval of NASDAQ's 
new options facility, the NASDAQ Options Market.\16\ In addition, the 
Commission notes that the prior version of this plan immediately prior 
to this proposed amendment was published for comment and the Commission 
did not receive any comments thereon.\17\ Finally, the Commission does 
not believe that the amendment to the plan raises any new regulatory 
issues that the Commission has not previously considered.
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    \16\ See Securities Exchange Act Release No. 57478 (March 12, 
2008) (SR-NASDAQ-2007-004) (SR-NASDAQ-2007-080).
    \17\ See supra note 15 (citing to Securities Exchange Act 
Release No. 55532).
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VI. Conclusion

    This order gives effect to the amended plan submitted to the 
Commission that is contained in File No. S7-966.
    It is therefore ordered, pursuant to Section 17(d) of the Act,\18\ 
that the amended plan dated December 27, 2007 by and between the Amex, 
BSE, CBOE, ISE, FINRA, NASDAQ, NYSE, NYSE Arca, and Phlx filed pursuant 
to Rule 17d-2 is hereby approved and declared effective.
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    \18\ 15 U.S.C. 78q(d).
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    It is further ordered that those SRO participants that are not the 
DOEA as to a particular common member are relieved of those regulatory 
responsibilities allocated to the common member's DOEA under the 
amended plan to the extent of such allocation.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\

    \19\ 17 CFR 200.30-3(a)(34).
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Nancy M. Morris,
Secretary.
 [FR Doc. E8-5321 Filed 3-17-08; 8:45 am]
BILLING CODE 8011-01-P