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]
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Federal Register / Vol. 73, No. 53 / Tuesday, March 18, 2008 / Notices
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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.
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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
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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
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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
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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).
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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).
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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).
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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
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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
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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
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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.
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17:39 Mar 17, 2008
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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
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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
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17:39 Mar 17, 2008
Jkt 214001
• Use the Commission’s Internet
comment form (https://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 (https://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
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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 https://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]
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78q(d)(1).
\7\ See Securities Act Amendments of 1975, Report of the Senate
Committee on Banking, Housing, and Urban Affairs to Accompany S.
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
---------------------------------------------------------------------------
To implement Section 17(d)(1), the Commission adopted two rules:
Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
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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 (https://
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 (https://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
