Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend Rule 623 (Communications to Customers), 13286-13289 [E9-6617]
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Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices
All submissions should refer to File
Number SR–FINRA–2008–055. 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/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of such filing also will be
available for inspection and copying at
the principal office of FINRA. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–FINRA–2008–055 and
should be submitted on or before April
16, 2009.
VI. Conclusions
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,36 that the
proposed rule change (SR–FINRA–
2008–055), as modified by Amendment
No. 1, be, and hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–6659 Filed 3–25–09; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59600; File No. SR–ISE–
2009–09]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change to Amend Rule 623
(Communications to Customers)
March 19, 2009.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Exchange Act’’),1 and Rule 19b–4
thereunder,2 notice is hereby given that
on March 11, 2009, the International
Securities Exchange, LLC (the
‘‘Exchange’’ or the ‘‘ISE’’) filed with the
Securities and Exchange Commission
the proposed rule change, as described
in Items I and II below, which items
have been prepared by the Exchange.
ISE has designated the proposed rule
change as constituting a noncontroversial rule change under Rule
19b–4(f)(6) under the Act,3 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 Exchange proposes to remove or
otherwise amend elements of ISE Rule
623 (‘‘Communications to Customers’’)
that incorporate provisions of the
Securities Act of 1933 (‘‘Securities
Act’’) 4 because options traded on the
Exchange consist solely of standardized
options issued by the Options Clearing
Corporation (‘‘OCC’’), a registered
clearing agency, that are exempt under
Rule 238 of the Securities Act from all
provisions of the Securities Act except
the antifraud provisions of Section 17.
Additionally, the proposed amendments
expand the types of communications
governed by Rule 623 to include
independently prepared reprints and
other communications between a
member or member organization and a
customer. The proposed amendments
also exempt certain options
communications from the pre-approval
requirement by a Registered Options
Principal (‘‘ROP’’). The text of the
proposed rule change is available at the
Exchange, the Commission’s Public
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 17 CFR 240 19b–4(f)(6).
4 15 U.S.C. 77a et seq.
2 17
36 15
37 17
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
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Reference Room, and https://
www.ise.com.
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
self-regulatory organization included
statements concerning the purpose of
and basis for the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
sections A, B and C below.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On December 23, 2002, the
Commission published final rules that
exempt standardized options, as defined
in Rule 9b–1 5 of the Exchange Act, that
are issued by a registered clearing
agency and traded on a registered
national securities exchange or on a
registered national securities
association, from all provisions of the
Securities Act (other than the anti-fraud
provisions) and the registration
requirements of the Exchange Act.6
Because the Securities Act and the rules
thereunder (other than the anti-fraud
provisions) are no longer applicable to
such standardized options, the
Exchange proposes to remove elements
of the Securities Act that are embedded
in ISE Rule 623. In particular, ISE
proposes to remove all references to a
‘‘prospectus’’ from Rule 623.
Prospectuses are no longer required for
such standardized options, and the OCC
has, in fact, ceased publication of a
prospectus.7 In addition, the proposed
amendments will update and reorganize
Rule 623. The proposed amendments
are similar to amendments filed with
and approved by the Commission by the
Financial Industry Regulatory
Authority, Inc. and the Chicago Board
Options Exchange, and, if adopted,
would provide a more uniform
5 17
CFR 240.9b–1.
Exemption for Standardized Options From
Provisions of the Securities Act of 1933 and From
the Registration Requirements of the Securities
Exchange Act of 1934; Final Rule, Securities Act
Release No. 8171 and Exchange Act Release No.
47082 (December 23, 2002), 68 FR 188 (January 2,
2003).
7 The options disclosure document (‘‘ODD’’)
prepared in accordance with Rule 9b–1 under the
Exchange Act is not deemed to be a prospectus. 17
CFR 230.135b. See, e.g., Securities Act Release No.
8049 (Dec. 21, 2001), 67 FR 228 (Jan. 2, 2002).
6 See
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Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices
approach to communications to
customers regarding standardized
options.8
a. Deletion of Certain Provisions
As noted above, ISE Rule 623 contains
a number of references to a prospectus
and other Securities Act requirements.
The Exchange proposes to delete the
following from Rule 623: Rule 623(a)(4),
which references the Securities Act
definition of prospectus; Rule 623(e),
which incorporates Securities Act
principles in that it prohibits written
material concerning options from being
furnished to any person who has not
previously or contemporaneously
received the ODD; Rule 623(a)(2), which
defines the term ‘‘Educational
Material;’’ 9 Rule 623(g), which outlines
what is permitted in an
‘‘Advertisement;’’ 10 and Rule 623(h),
which concerns educational material.11
b. Redesignation of Rule 623(a) to
Proposed Rule 623(d) and Related
Amendments
Rule 623(a) currently contains an
outline of the ‘‘General Rule’’ for
options communications. ISE proposes
to redesignate paragraph (a) as
paragraph (d), and to incorporate
limitations on the use of options
communications contained in Rule
623(f) into proposed Rule 623(d). In
addition, proposed Rule 623(d)(3)
would amend Rule 623(a)(3) by
clarifying the types of cautionary
statements and caveats that are
prohibited. Also, as previously noted,
ISE proposes to delete Rule 623(a)(4).
Further, current Rule 623(i) sets forth
the standards applicable to Sales
Literature and (i)(1) sets forth the
requirement that Sales Literature shall
state that supporting documentation for
any claims, comparisons,
recommendations, statistics or other
technical data, will be supplied upon
request. The Exchange proposed to
redesignate Rule 623(i)(1) as proposed
Rule 623(d)(7).
8 See Exchange Act Release No. 57720 (Apr. 25,
2008), 73 FR 24332 (May 2, 2008) (SR FINRA–
2008–13), and Exchange Act Release No. 58823
(October 21, 2008), 73 FR 63747 (October 28, 2008)
(SR–CBOE 2007–30).
9 This paragraph essentially incorporates
language of Securities Act Rule 134a. While this
amendment would eliminate the separate
educational material category, as discussed below
the Exchange also proposes to revise the definition
of Sales Literature to include educational material.
10 This paragraph essentially incorporates
language of Securities Act Rule 134.
11 See note 9, supra.
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c. Redesignation of Rule 623(c) to
Proposed Rule 623(b) and Proposed
Amendments
ISE proposes to redesignate paragraph
(c) as paragraph (b). ISE also proposes
to amend this paragraph to include the
types of communications proposed to be
added to the definition of ‘‘Options
Communications’’ in proposed Rule
623(a). Proposed Rules 623(b)(2) and
(b)(3) would also amend the current
requirements to obtain advance
approval by a ROP for most options
communications by exempting certain
options communications, defined as
‘‘Correspondence’’ and ‘‘Institutional
Sales Material.’’ Specifically, proposed
Rule 623(b)(2) would exempt
correspondence from the pre-approval
requirement unless the correspondence
is distributed to 25 or more existing
retail customers within any 30 calendarday period and makes any financial or
investment recommendation or
otherwise promotes a product or service
of the member. All correspondence
would be subject to general supervision
and review requirements. Proposed Rule
623(b)(3) would exempt institutional
sales material from the pre-approval
requirement if the material is
distributed to ‘‘qualified investors’’ (as
defined in Section 3(a)(54) of the
Exchange Act).12 Pre-approval by a ROP
would, however, be required with
respect to independently prepared
reprints. In addition, Proposed Rule
623(b)(4) would require that firms retain
options communications in accordance
with the record-keeping requirements of
Rule 17a–4 under the Exchange Act.13
Proposed Rule 623(b)(4) would also
require that firms retain other related
documents in the form and for the time
periods required for options
communications by Rule 17a–4.
d. Redesignation of Rule 623(d) to
Proposed Rule 623(c) and Related
Amendments
ISE proposes to redesignate paragraph
(d) as paragraph (c). Rule 623(d)
currently requires members to obtain
approval for every advertisement and all
educational material from the Exchange.
This requirement applies regardless of
whether the options communications
are used before or after the delivery of
a current ODD. ISE proposes to amend
this provision to require approval by the
12 15
U.S.C. 78c(a)(54).
CFR 240.17a–4. More specifically, Rule 17a–
4(b)(4) requires that a broker-dealer retain ‘‘originals
of all communications received and copies of all
communications sent * * * including all
communications which are subject to rules of a selfregulatory organization of which the member,
broker or dealer is a member regarding
communications with the public.’’
13 17
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13287
Exchange only with respect to options
communications used prior to the
delivery of a current ODD. The
Exchange pre-approval requirement for
options communications used
subsequent to the delivery of the ODD
is being eliminated because the ODD
should help alert the customer to the
characteristics and risks associated with
trading in options and because Rule
623(b) requires the Registered Options
Principal of a member organization to
pre-approve options communications
(with certain exceptions for
‘‘Correspondence’’ and ‘‘Institutional
Sales Material’’). This provision would
also be amended to include the types of
communications added to the definition
of ‘‘Options Communications’’ in
proposed Rule 623(a).
e. Redesignation of Rule 623(b) to
Proposed Rule 623(a) and Related
Amendments
Rule 623(b) currently defines terms
used in Rule 623. ISE proposes to
redesignate paragraph (b) as paragraph
(a). ISE also proposes to amend the
definition of ‘‘Options
Communications’’ in proposed Rule
623(a) to expand the types of
communications governed by Rule 623
to include independently prepared
reprints and other communications
between a member or member
organization and a customer. The
Exchange proposes to amend the
definitions of ‘‘Advertisement’’ and
‘‘Sales Literature;’’ and define
‘‘Correspondence,’’ ‘‘Institutional Sales
Material,’’ ‘‘Public Appearances,’’ and
‘‘Independently Prepared Reprints;’’ to
clarify the rule. In addition, as
previously noted, ISE proposes to delete
the definition of ‘‘Educational
Material.’’
f. Proposed Rule 623(e)
Proposed Rule 623(e) would set forth
(i) standards for options
communications that are not preceded
or accompanied by an ODD and (ii)
standards for options communications
used prior to delivery of an ODD. These
requirements generally would clarify
and restate the requirements contained
in the current Rule 623(i). Proposed
Rule 623(e)(1)(B) would require options
communications to contain contact
information for obtaining a copy of the
ODD. As previously noted, the
provisions of Rule 623(g) that outline
what is permitted in an advertisement
are proposed to be deleted and the
provisions relating to standards for
options communications used prior to
delivery of the ODD are proposed to be
incorporated into proposed Rule
623(e)(2).
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Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices
g. Redesignation of Portions of Rule
623(i) to Proposed Rule 623(g),
Proposed Rule 623(h), Proposed Rule
623(i), and Related Amendments
As stated above, the Exchange
proposes to redesignate Rule 623(i)(1) as
proposed Rule 623(d)(7). Current Rule
623(i)(2) pertains to standards for Sales
Literature that contains projected
performance figures and current Rule
623(i)(3) pertains to standards for Sales
Literature that contains historical
performance figures. The Exchange
proposes to redesignate Rule 623(i)(2) as
proposed Rule 623(g)(1) and Rule
623(i)(3) as proposed Rule 623(h). Rule
623(i) currently requires that a copy of
the ODD precede or accompany options
related sales literature. The Exchange is
proposing to modify the ODD delivery
requirement applicable to sales
literature to provide that an ODD must
precede or accompany any
communication that conveys past or
projected performance figures involving
options or constitutes a
recommendation pertaining to options.
A notice providing the name and
address of a person from whom the ODD
may be obtained would be required in
sales literature that does not contain a
recommendation or past or projected
performance figures. Because ISE is
proposing to merge educational material
into the sales literature category,14 this
amendment would continue to allow
communications that are educational in
nature to be disseminated without being
preceded or accompanied by a copy of
the ODD.
The Exchange proposes to redesignate
current Rule 623(i)(4) as proposed Rule
623(i). The Exchange proposes to delete
Rules 623(i)(5), (i)(6), and (i)(7). The
Exchange believes that (i)(5) and (i)(6)
are unnecessary because worksheets are
included in the definition of ‘‘Sales
Literature.’’ The Exchange believes that
(i)(7) is no longer necessary because the
Exchange is proposing to clarify the
record-keeping requirements applicable
to options communications in proposed
Rule 623(b)(4).
2. Statutory Basis
The Exchange believes that the
proposal is consistent with the
requirements of Section 6(b) of the
Act,15 in general, and furthers the
objectives of Section 6(b)(5) of the Act,16
in particular, in that it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, and to
protect investors and the public interest
in that it is designed to foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, to remove impediments to
and perfect the mechanism for a free
and open market and a national market
system, and, in general, to protect
investors and the public interest.
Specifically, this proposed rule change
will promote consistency between ISE
and other SRO rules and provide the
investing public with options
communications rules that are designed
to provide appropriate safeguards and
greater clarity.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The proposed rule change does not
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any written
comments from members or other
interested parties.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing rule change: (1)
Does not significantly affect the
protection of investors or the public
interest; (2) does not impose any
significant burden on competition and
(3) by its terms, does not become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 17 and Rule 19b–
4(f)(6) 18 thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) 19 does not become
operative prior to 30 days after the date
of filing or such shorter time as the
Commission may designate if such
action is consistent with the protection
of investors and the public interest.
However, Rule 19b–4(f)(6) 20 permits the
Commission to designate a shorter time
if such action is consistent with the
protection of investors and the public
interest. The Exchange requests that the
Commission waive the 30-day operative
17 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
19 17 CFR 240.19b–4(f)(6).
20 17 CFR 240.19b–4(f)(6).
14 See
Proposed Rule 623(a)(2).
15 15 U.S.C. 78f(b).
16 15 U.S.C. 78f(b)(5).
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18 17
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delay period to permit the proposed rule
change to be implemented immediately.
The Commission notes that the
proposed rule change is substantially
identical to a proposed rule change that
was approved by the Commission after
an opportunity for public comment,21
and does not raise any new substantive
issues. For these reasons, the
Commission believes that waiver of the
30-day operative delay 22 is consistent
with the protection of investors and the
public interest and designates the
proposal operative upon filing.
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form https://www.sec.gov/
rules/sro.shtml; or
• Send an e-mail to rulecomments@sec.gov. Please include File
No. SR–ISE–2009–09 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–ISE–2009–09. 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 Commissions
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
21 ISE’s proposed rule change is substantially
identical to a proposed rule change by the Chicago
Board Options Exchange (‘‘CBOE’’) that was
recently approved by the Commission. See
Exchange Act Release No. 58823 (October 21, 2008),
73 FR 63747 (October 28, 2008) (SR–CBOE–2007–
30).
22 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room, 100 F Street, NE., Washington,
DC 20549 on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of such filing also will be
available for inspection and copying at
the principal office of the ISE. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–ISE–2009–09 and should be
submitted on or before April 16, 2009.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.23
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–6617 Filed 3–25–09; 8:45 am]
BILLING CODE
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59602; File No. SR–MSRB–
2009–01]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Extend the Electronic
Municipal Market Access System Pilot
March 19, 2009.
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 18,
2009, the Municipal Securities
Rulemaking Board (‘‘MSRB’’ or
‘‘Board’’), filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, II and III below, which Items
have been substantially prepared by the
MSRB. The MSRB has filed the proposal
as a ‘‘non-controversial’’ rule change
pursuant to Section 19(b)(3)(A)(iii) of
the Act,3 and Rule 19b–4(f)(6)
23 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
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20:28 Mar 25, 2009
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 MSRB is proposing to extend the
MSRB’s pilot of its Electronic Municipal
Market Access system, currently
operating as a facility of the MSRB’s
Municipal Securities Information
Library system (the ‘‘EMMA pilot’’), to
the earlier of July 1, 2009 or the date on
which the MSRB places into operation
EMMA’s permanent primary market
disclosure service for electronic
submission and public availability on
EMMA’s Internet portal (the ‘‘EMMA
portal’’) of official statements, advance
refunding documents and related
primary market documents and
information (the ‘‘primary market
disclosure service’’) and permanent
transparency service making municipal
securities transaction price data
publicly available on the EMMA portal
(the ‘‘trade price transparency service’’
and, together with the primary market
disclosure service, the ‘‘permanent
EMMA services’’). The proposed rule
change does not effect a change in
existing rule language.
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
MSRB included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. The MSRB 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
The Commission has previously
approved the operation by the MSRB of
the EMMA pilot for a period of one year
from the date the EMMA pilot became
operational.5 The EMMA pilot became
operational on March 31, 2008. The
4 17
CFR 240.19b–4(f)(6).
Securities Exchange Act Release No. 57577
(March 28, 2008), 73 FR 18022 (April 2, 2008) (File
No. SR–MSRB–2007–06).
5 See
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13289
MSRB expects to file with the
Commission in the near future a
proposed rule change to establish the
permanent EMMA services, with a
proposed date for commencement of
operation of the permanent EMMA
services on the later of (i) May 11, 2009
or (ii) the date announced by the MSRB
in a notice published on the MSRB Web
site, which date shall be no earlier than
ten business days after Commission
approval of the permanent EMMA
services and shall be announced no
fewer than five business days prior to
such date. Upon the permanent EMMA
services being approved and placed into
operation, the permanent EMMA
services would replace the EMMA pilot,
at which time the EMMA pilot would be
terminated.
In order to maintain the EMMA pilot
in operation until the permanent EMMA
services become operational, the MSRB
is requesting that the Commission
extend the EMMA pilot to the earlier of
July 1, 2009 or the date on which the
MSRB places into operation the
permanent EMMA services.
2. Statutory Basis
The MSRB believes that the proposed
rule change is consistent with Section
15B(b)(2)(C) of the Act,6 which provides
that the MSRB’s rules shall:
be designed to prevent fraudulent and
manipulative acts and practices, to promote
just and equitable principles of trade, to
foster cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with respect
to, and facilitating transactions in municipal
securities, to remove impediments to and
perfect the mechanism of a free and open
market in municipal securities, and, in
general, to protect investors and the public
interest.
The MSRB believes that the proposed
rule change is consistent with the Act.
The extension of the EMMA pilot will
continue to remove impediments to and
help perfect the mechanisms of a free
and open market in municipal
securities, assist in preventing
fraudulent and manipulative acts and
practices, and will in general promote
investor protection and the public
interest by ensuring equal access for all
market participants to the critical
disclosure information needed by
investors in the municipal securities
market.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Board does not believe that the
proposed rule change will impose any
burden on competition not necessary or
6 15
U.S.C. 78o–4(b)(2)(C).
E:\FR\FM\26MRN1.SGM
26MRN1
]]>Agencies
[Federal Register Volume 74, Number 57 (Thursday, March 26, 2009)]
[Notices]
[Pages 13286-13289]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-6617]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59600; File No. SR-ISE-2009-09]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change to Amend Rule 623 (Communications to Customers)
March 19, 2009.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is
hereby given that on March 11, 2009, the International Securities
Exchange, LLC (the ``Exchange'' or the ``ISE'') filed with the
Securities and Exchange Commission the proposed rule change, as
described in Items I and II below, which items have been prepared by
the Exchange. ISE has designated the proposed rule change as
constituting a non-controversial rule change under Rule 19b-4(f)(6)
under the Act,\3\ 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240 19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to remove or otherwise amend elements of ISE
Rule 623 (``Communications to Customers'') that incorporate provisions
of the Securities Act of 1933 (``Securities Act'') \4\ because options
traded on the Exchange consist solely of standardized options issued by
the Options Clearing Corporation (``OCC''), a registered clearing
agency, that are exempt under Rule 238 of the Securities Act from all
provisions of the Securities Act except the antifraud provisions of
Section 17. Additionally, the proposed amendments expand the types of
communications governed by Rule 623 to include independently prepared
reprints and other communications between a member or member
organization and a customer. The proposed amendments also exempt
certain options communications from the pre-approval requirement by a
Registered Options Principal (``ROP''). The text of the proposed rule
change is available at the Exchange, the Commission's Public Reference
Room, and https://www.ise.com.
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\4\ 15 U.S.C. 77a et seq.
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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 self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in sections A, B and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On December 23, 2002, the Commission published final rules that
exempt standardized options, as defined in Rule 9b-1 \5\ of the
Exchange Act, that are issued by a registered clearing agency and
traded on a registered national securities exchange or on a registered
national securities association, from all provisions of the Securities
Act (other than the anti-fraud provisions) and the registration
requirements of the Exchange Act.\6\ Because the Securities Act and the
rules thereunder (other than the anti-fraud provisions) are no longer
applicable to such standardized options, the Exchange proposes to
remove elements of the Securities Act that are embedded in ISE Rule
623. In particular, ISE proposes to remove all references to a
``prospectus'' from Rule 623. Prospectuses are no longer required for
such standardized options, and the OCC has, in fact, ceased publication
of a prospectus.\7\ In addition, the proposed amendments will update
and reorganize Rule 623. The proposed amendments are similar to
amendments filed with and approved by the Commission by the Financial
Industry Regulatory Authority, Inc. and the Chicago Board Options
Exchange, and, if adopted, would provide a more uniform
[[Page 13287]]
approach to communications to customers regarding standardized
options.\8\
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\5\ 17 CFR 240.9b-1.
\6\ See Exemption for Standardized Options From Provisions of
the Securities Act of 1933 and From the Registration Requirements of
the Securities Exchange Act of 1934; Final Rule, Securities Act
Release No. 8171 and Exchange Act Release No. 47082 (December 23,
2002), 68 FR 188 (January 2, 2003).
\7\ The options disclosure document (``ODD'') prepared in
accordance with Rule 9b-1 under the Exchange Act is not deemed to be
a prospectus. 17 CFR 230.135b. See, e.g., Securities Act Release No.
8049 (Dec. 21, 2001), 67 FR 228 (Jan. 2, 2002).
\8\ See Exchange Act Release No. 57720 (Apr. 25, 2008), 73 FR
24332 (May 2, 2008) (SR FINRA-2008-13), and Exchange Act Release No.
58823 (October 21, 2008), 73 FR 63747 (October 28, 2008) (SR-CBOE
2007-30).
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a. Deletion of Certain Provisions
As noted above, ISE Rule 623 contains a number of references to a
prospectus and other Securities Act requirements. The Exchange proposes
to delete the following from Rule 623: Rule 623(a)(4), which references
the Securities Act definition of prospectus; Rule 623(e), which
incorporates Securities Act principles in that it prohibits written
material concerning options from being furnished to any person who has
not previously or contemporaneously received the ODD; Rule 623(a)(2),
which defines the term ``Educational Material;'' \9\ Rule 623(g), which
outlines what is permitted in an ``Advertisement;'' \10\ and Rule
623(h), which concerns educational material.\11\
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\9\ This paragraph essentially incorporates language of
Securities Act Rule 134a. While this amendment would eliminate the
separate educational material category, as discussed below the
Exchange also proposes to revise the definition of Sales Literature
to include educational material.
\10\ This paragraph essentially incorporates language of
Securities Act Rule 134.
\11\ See note 9, supra.
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b. Redesignation of Rule 623(a) to Proposed Rule 623(d) and Related
Amendments
Rule 623(a) currently contains an outline of the ``General Rule''
for options communications. ISE proposes to redesignate paragraph (a)
as paragraph (d), and to incorporate limitations on the use of options
communications contained in Rule 623(f) into proposed Rule 623(d). In
addition, proposed Rule 623(d)(3) would amend Rule 623(a)(3) by
clarifying the types of cautionary statements and caveats that are
prohibited. Also, as previously noted, ISE proposes to delete Rule
623(a)(4). Further, current Rule 623(i) sets forth the standards
applicable to Sales Literature and (i)(1) sets forth the requirement
that Sales Literature shall state that supporting documentation for any
claims, comparisons, recommendations, statistics or other technical
data, will be supplied upon request. The Exchange proposed to
redesignate Rule 623(i)(1) as proposed Rule 623(d)(7).
c. Redesignation of Rule 623(c) to Proposed Rule 623(b) and Proposed
Amendments
ISE proposes to redesignate paragraph (c) as paragraph (b). ISE
also proposes to amend this paragraph to include the types of
communications proposed to be added to the definition of ``Options
Communications'' in proposed Rule 623(a). Proposed Rules 623(b)(2) and
(b)(3) would also amend the current requirements to obtain advance
approval by a ROP for most options communications by exempting certain
options communications, defined as ``Correspondence'' and
``Institutional Sales Material.'' Specifically, proposed Rule 623(b)(2)
would exempt correspondence from the pre-approval requirement unless
the correspondence is distributed to 25 or more existing retail
customers within any 30 calendar-day period and makes any financial or
investment recommendation or otherwise promotes a product or service of
the member. All correspondence would be subject to general supervision
and review requirements. Proposed Rule 623(b)(3) would exempt
institutional sales material from the pre-approval requirement if the
material is distributed to ``qualified investors'' (as defined in
Section 3(a)(54) of the Exchange Act).\12\ Pre-approval by a ROP would,
however, be required with respect to independently prepared reprints.
In addition, Proposed Rule 623(b)(4) would require that firms retain
options communications in accordance with the record-keeping
requirements of Rule 17a-4 under the Exchange Act.\13\ Proposed Rule
623(b)(4) would also require that firms retain other related documents
in the form and for the time periods required for options
communications by Rule 17a-4.
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\12\ 15 U.S.C. 78c(a)(54).
\13\ 17 CFR 240.17a-4. More specifically, Rule 17a-4(b)(4)
requires that a broker-dealer retain ``originals of all
communications received and copies of all communications sent * * *
including all communications which are subject to rules of a self-
regulatory organization of which the member, broker or dealer is a
member regarding communications with the public.''
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d. Redesignation of Rule 623(d) to Proposed Rule 623(c) and Related
Amendments
ISE proposes to redesignate paragraph (d) as paragraph (c). Rule
623(d) currently requires members to obtain approval for every
advertisement and all educational material from the Exchange. This
requirement applies regardless of whether the options communications
are used before or after the delivery of a current ODD. ISE proposes to
amend this provision to require approval by the Exchange only with
respect to options communications used prior to the delivery of a
current ODD. The Exchange pre-approval requirement for options
communications used subsequent to the delivery of the ODD is being
eliminated because the ODD should help alert the customer to the
characteristics and risks associated with trading in options and
because Rule 623(b) requires the Registered Options Principal of a
member organization to pre-approve options communications (with certain
exceptions for ``Correspondence'' and ``Institutional Sales
Material''). This provision would also be amended to include the types
of communications added to the definition of ``Options Communications''
in proposed Rule 623(a).
e. Redesignation of Rule 623(b) to Proposed Rule 623(a) and Related
Amendments
Rule 623(b) currently defines terms used in Rule 623. ISE proposes
to redesignate paragraph (b) as paragraph (a). ISE also proposes to
amend the definition of ``Options Communications'' in proposed Rule
623(a) to expand the types of communications governed by Rule 623 to
include independently prepared reprints and other communications
between a member or member organization and a customer. The Exchange
proposes to amend the definitions of ``Advertisement'' and ``Sales
Literature;'' and define ``Correspondence,'' ``Institutional Sales
Material,'' ``Public Appearances,'' and ``Independently Prepared
Reprints;'' to clarify the rule. In addition, as previously noted, ISE
proposes to delete the definition of ``Educational Material.''
f. Proposed Rule 623(e)
Proposed Rule 623(e) would set forth (i) standards for options
communications that are not preceded or accompanied by an ODD and (ii)
standards for options communications used prior to delivery of an ODD.
These requirements generally would clarify and restate the requirements
contained in the current Rule 623(i). Proposed Rule 623(e)(1)(B) would
require options communications to contain contact information for
obtaining a copy of the ODD. As previously noted, the provisions of
Rule 623(g) that outline what is permitted in an advertisement are
proposed to be deleted and the provisions relating to standards for
options communications used prior to delivery of the ODD are proposed
to be incorporated into proposed Rule 623(e)(2).
[[Page 13288]]
g. Redesignation of Portions of Rule 623(i) to Proposed Rule 623(g),
Proposed Rule 623(h), Proposed Rule 623(i), and Related Amendments
As stated above, the Exchange proposes to redesignate Rule
623(i)(1) as proposed Rule 623(d)(7). Current Rule 623(i)(2) pertains
to standards for Sales Literature that contains projected performance
figures and current Rule 623(i)(3) pertains to standards for Sales
Literature that contains historical performance figures. The Exchange
proposes to redesignate Rule 623(i)(2) as proposed Rule 623(g)(1) and
Rule 623(i)(3) as proposed Rule 623(h). Rule 623(i) currently requires
that a copy of the ODD precede or accompany options related sales
literature. The Exchange is proposing to modify the ODD delivery
requirement applicable to sales literature to provide that an ODD must
precede or accompany any communication that conveys past or projected
performance figures involving options or constitutes a recommendation
pertaining to options. A notice providing the name and address of a
person from whom the ODD may be obtained would be required in sales
literature that does not contain a recommendation or past or projected
performance figures. Because ISE is proposing to merge educational
material into the sales literature category,\14\ this amendment would
continue to allow communications that are educational in nature to be
disseminated without being preceded or accompanied by a copy of the
ODD.
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\14\ See Proposed Rule 623(a)(2).
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The Exchange proposes to redesignate current Rule 623(i)(4) as
proposed Rule 623(i). The Exchange proposes to delete Rules 623(i)(5),
(i)(6), and (i)(7). The Exchange believes that (i)(5) and (i)(6) are
unnecessary because worksheets are included in the definition of
``Sales Literature.'' The Exchange believes that (i)(7) is no longer
necessary because the Exchange is proposing to clarify the record-
keeping requirements applicable to options communications in proposed
Rule 623(b)(4).
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\15\ in general, and furthers
the objectives of Section 6(b)(5) of the Act,\16\ in particular, in
that it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and to
protect investors and the public interest in that it is designed to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism for a free and open market and a national market
system, and, in general, to protect investors and the public interest.
Specifically, this proposed rule change will promote consistency
between ISE and other SRO rules and provide the investing public with
options communications rules that are designed to provide appropriate
safeguards and greater clarity.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any written comments from members or other interested parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing rule change: (1) Does not significantly
affect the protection of investors or the public interest; (2) does not
impose any significant burden on competition and (3) by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \17\ and Rule 19b-
4(f)(6) \18\ thereunder.
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \19\ does not
become operative prior to 30 days after the date of filing or such
shorter time as the Commission may designate if such action is
consistent with the protection of investors and the public interest.
However, Rule 19b-4(f)(6) \20\ permits the Commission to designate a
shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange requests that the
Commission waive the 30-day operative delay period to permit the
proposed rule change to be implemented immediately. The Commission
notes that the proposed rule change is substantially identical to a
proposed rule change that was approved by the Commission after an
opportunity for public comment,\21\ and does not raise any new
substantive issues. For these reasons, the Commission believes that
waiver of the 30-day operative delay \22\ is consistent with the
protection of investors and the public interest and designates the
proposal operative upon filing.
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\19\ 17 CFR 240.19b-4(f)(6).
\20\ 17 CFR 240.19b-4(f)(6).
\21\ ISE's proposed rule change is substantially identical to a
proposed rule change by the Chicago Board Options Exchange
(``CBOE'') that was recently approved by the Commission. See
Exchange Act Release No. 58823 (October 21, 2008), 73 FR 63747
(October 28, 2008) (SR-CBOE-2007-30).
\22\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form https://www.sec.gov/rules/sro.shtml; or
Send an e-mail to rule-comments@sec.gov. Please include
File No. SR-ISE-2009-09 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-ISE-2009-09. 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 Commissions Internet Web site (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent
[[Page 13289]]
amendments, all written statements with respect to the proposed rule
change that are filed with the Commission, and all written
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for inspection and copying in the Commission's Public
Reference Room, 100 F Street, NE., Washington, DC 20549 on official
business days between the hours of 10 a.m. and 3 p.m. Copies of such
filing also will be available for inspection and copying at the
principal office of the ISE. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-ISE-2009-09 and should be submitted on or before April
16, 2009.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-6617 Filed 3-25-09; 8:45 am]
BILLING CODE
