Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Amendments to FINRA Rule 2360 (Options) Regarding Position Limits for Options on Exchange-Traded Funds and Registration Qualifications With Respect to Options Discretionary Accounts, 25584-25586 [E9-12311]
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25584
Federal Register / Vol. 74, No. 101 / Thursday, May 28, 2009 / Notices
by and hold discussions with
representatives of the NRC staff, GEH,
Dominion, and other interested persons
regarding this matter. The
Subcommittee will gather information,
analyze relevant issues and facts, and
formulate proposed positions and
actions, as appropriate, for deliberation
by the full Committee.
Members of the public desiring to
provide oral statements and/or written
comments should notify the Designated
Federal Official, Christopher Brown,
(Telephone: 301–415–7111) five days
prior to the meeting, if possible, so that
appropriate arrangements can be made.
Electronic recordings will be permitted
only during those portions of the
meeting that are open to the public.
Detailed procedures for the conduct of
and participation in ACRS meetings
were published in the Federal Register
on October 6, 2008 (73 FR 58268–
58269).
Further information regarding this
meeting can be obtained by contacting
the Designated Federal Official between
6:45 a.m. and 3:30 p.m. (ET). Persons
planning to attend this meeting are
urged to contact the above named
individual at least two working days
prior to the meeting to be advised of any
potential changes to the agenda.
Dated: May 22, 2009.
Cayetano Santos,
Chief, Reactor Safety Branch A, Advisory
Committee on Reactor Safeguards.
[FR Doc. E9–12384 Filed 5–27–09; 8:45 am]
Commissioner Casey, as duty officer,
voted to consider the item listed for the
Closed Meetings in closed sessions, and
determined that no earlier notice of the
May 27, 2009 Closed Meeting was
possible.
The subject matter of the Closed
Meeting scheduled for Wednesday, May
27, 2009 will be: Institution and
settlement of injunctive actions; and
other matters related to enforcement
proceedings.
The subject matter of the Closed
Meeting scheduled for Thursday, May
28, 2009 will be: Institution and
settlement of injunctive actions;
institution and settlement of
administrative proceedings of an
enforcement nature; an opinion; and
other matters related to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact: The Office of the Secretary at
(202) 551–5400.
Dated: May 21, 2009.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9–12347 Filed 5–27–09; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
BILLING CODE 7590–01–P
[Release No. 34–59946; File No. SR–FINRA–
2009–032]
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to Amendments
to FINRA Rule 2360 (Options)
Regarding Position Limits for Options
on Exchange-Traded Funds and
Registration Qualifications With
Respect to Options Discretionary
Accounts
Sunshine Act Meetings
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold Closed Meetings
on Wednesday, May 27, 2009 at 1 p.m.
and Thursday, May 28, 2009 at 2 p.m.
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meetings. Certain
staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (7), 9(B) and (10)
and 17 CFR 200.402(a)(3), (5), (7), 9(ii)
and (10), permit consideration of the
scheduled matters at the Closed
Meetings.
VerDate Nov<24>2008
17:11 May 27, 2009
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May 20, 2009.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 11,
2009, Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) (f/k/a
National Association of Securities
Dealers, Inc. (‘‘NASD’’)) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00106
Fmt 4703
II below, which Items have been
prepared by FINRA. FINRA has
designated the proposed rule change as
constituting a ‘‘non-controversial’’ rule
change under paragraph (f)(6) of Rule
19b–4 under the Act,3 which renders
the proposal effective upon receipt of
this filing by the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to amend FINRA
Rule 2360 (Options) to (1) establish
higher position limits for options on
selected exchange-traded funds, (2)
clarify the application of position limits
to conventional options on exchangetraded funds, and (3) clarify the
appropriate registration qualifications
for accepting and reviewing the
acceptance of options discretionary
accounts.
The text of the proposed rule change
is available on FINRA’s Web site at
https://www.finra.org, at the principal
office of FINRA and at 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,
FINRA included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. FINRA has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
parts of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The proposed rule change would add
Supplementary Material to FINRA Rule
2360 (Options) to (1) establish higher
position limits for options on selected
exchange-traded funds (‘‘ETFs’’) and (2)
clarify the application of position limits
to conventional options on ETFs. In
addition, the proposed rule change
would amend FINRA Rule 2360(b)(18)
to clarify the appropriate registration
qualifications for accepting and
reviewing the acceptance of options
discretionary accounts.
3 17
Sfmt 4703
CFR 240.19b–4(f)(6).
E:\FR\FM\28MYN1.SGM
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Federal Register / Vol. 74, No. 101 / Thursday, May 28, 2009 / Notices
Options on ETFs. FINRA Rule
2360(b)(3) subjects standardized and
conventional options 4 to one of five
different position limits with the
maximum limit of 250,000 contracts.
FINRA’s position limits are consistent
with those of the Options Exchanges.5
The Options Exchanges, however, have
Supplementary Material that designates
higher position limits for options on
selected ETFs. The position limit for
options on The DIAMONDS Trust (DIA)
and the Standard and Poor’s Depositary
Receipts Trust (SPY) is 300,000
contracts. The position limit for options
on The iShares Russell 2000 Index Fund
(IWM) is 500,000 contracts, and the
position limit for options on The
PowerShares QQQ Trust (QQQQ) is
900,000 contracts. FINRA proposes, in
accordance with Rule 2360(b)(3)(A)(vi),
to establish the same position limits on
such options to ensure consistency with
rules of the Options Exchanges.
In addition, FINRA proposes to clarify
that the position limits for conventional
options on ETFs should be the same as
position limits for other equity
securities. Thus, if an ETF underlying a
conventional option also underlies a
standardized option, then the position
limit on the conventional ETF option
shall be the same as the position limit
for the standardized ETF option.6
However, if an ETF underlying a
conventional option does not also
underlie a standardized option, then the
position limit for the conventional ETF
option shall be the basic limit of 25,000
contracts.7 In order for such a
conventional ETF option to qualify for
a position limit greater than 25,000
4A
‘‘conventional option’’ is an option contract
not issued, or subject to issuance by, The Options
Clearing Corporation. See FINRA Rule 2360(a)(9).
Currently, position limits for standardized and
conventional options are the same with respect to
the same underlying security.
5 See Rule 4.11 of the CBOE; Rule 412 of the ISE;
Rule 1001 of NASDAQ OMX PHLX; Rule 904 of
NYSE AMEX; Rule 6.8 of NYSE Arca; and Chapter
III Section 7 of the BOX (collectively referred to as
the ‘‘Options Exchanges’’). The Commission notes
that the NASDAQ Options Market (‘‘NOM’’) also is
an options exchange that has position limit rules
that are consistent with the Options Exchanges. See
Chapter III, Section 7 of the NOM rules.
6 Since 1999, FINRA has maintained position
limit parity between conventional and standardized
options on the same security. See Securities
Exchange Act Release No. 40932 (January 11, 1999),
64 FR 2930, 2931 (January 19, 1999). Prior to 1999,
position limits on conventional options were three
times greater than the limits for standardized
options. See Securities Exchange Act Release No.
40087 (June 12, 1998), 63 FR 33746 (June 19, 1998).
7 See FINRA Rule 2360(b)(3)(A)(viii)a.1.
Conventional options are generally subject to a
position limit equal to the greater of (i) the basic
limit of 25,000 contracts or (ii) any standardized
option position limit as set forth in Rule
2360(b)(3)(A)(ii) through (v) (i.e., 50,000 to 250,000
contracts) for which the underlying security
qualifies.
VerDate Nov<24>2008
17:11 May 27, 2009
Jkt 217001
contracts, a member must apply for an
increased position limit in accordance
with FINRA Rule 2360(b)(3)(A)(viii)b by
first demonstrating to FINRA’s Market
Regulation Department that the
underlying ETF security meets the
standards for such higher options
position limit and the initial listing
standards for standardized options
trading.
Options Discretionary Accounts. On
November 12, 2008, the SEC approved
SR–FINRA–2008–032 (the ‘‘Options
Transfer Filing’’), which adopted NASD
Rules 2840 through 2853 regarding
Trading in Index Warrants, Currency
Index Warrants and Currency Warrants,
2860 (Options), and 2865 (Security
Futures) as FINRA Rules in the
consolidated FINRA rulebook.8 The
Options Transfer Filing renumbered
NASD Rules 2840 through 2853 as
FINRA Rules 2350 through 2359, NASD
Rule 2860 as FINRA Rule 2360 and
NASD Rule 2865 as FINRA Rule 2370 in
the consolidated FINRA rulebook. The
FINRA rules became effective on
February 17, 2009.9
In response to a comment letter to the
Options Transfer Filing,10 FINRA
proposed in Amendment No. 1,
consistent with the rules of the Chicago
Board Options Exchange (‘‘CBOE’’), to
amend FINRA Rule 2360(b)(18) to
permit greater flexibility and allow a
Limited Principal-General Securities
Sales Supervisor (‘‘LP–GSSS’’) (Series 9/
10) in addition to a Registered Options
Principal (‘‘ROP’’) (Series 4) to accept an
options discretionary account.11 Also,
consistent with the CBOE provision,
FINRA retained the requirement that the
review of the acceptance of a
discretionary options account may only
be performed by a ROP (Series 4).12
FINRA proposes to amend FINRA Rule
2360(b)(18)(A)(i)b and (b)(18)(A)(ii) to
8 See Securities Exchange Act Release No. 58932
(November 12, 2008), 73 FR 69696 (November 19,
2008) (Notice of Filing of Amendment No. 1 and
Order Granting Accelerated Approval to a Proposed
Rule Change, as Modified by Amendment No. 1;
File No. SR–FINRA 2008–032).
9 See Regulatory Notice 08–78 (December 2008)
(SEC Approves New Consolidated FINRA Rules).
10 See Letter from Melissa MacGregor, Vice
President and Assistant General Counsel, Securities
Industry and Financial Markets Association, to
Florence E. Harmon, Acting Secretary, SEC, dated
September 4, 2008.
11 See CBOE Rule 9.2.01 specifying that Options
Principals are qualified by passing either the Series
4 or the Series 9/10 and CBOE Rule 9.2.02
specifying that the review of the acceptance of a
discretionary account must be performed by a
Series 4 qualified individual.
12 FINRA would leave unchanged the
requirement that ‘‘frequent supervisory review by a
ROP who is not exercising the discretionary
authority’’ should be performed by a ROP (Series
4) as stated in Amendment No. 1 to the Options
Transfer Filing.
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
25585
ensure that the rule text more clearly
reflects the policy approved in the
Options Transfer Filing that either a
ROP (Series 4) or a LP–GSSS (Series 9/
10) may accept an options discretionary
account, but that the review of the
acceptance must be performed by a ROP
(Series 4).
FINRA has filed the proposed rule
change for immediate effectiveness and
has requested that the SEC waive the
requirement that the proposed rule
change not become operative for 30 days
after the date of the filing, such that
FINRA can implement the proposed
rule change immediately.
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,13 which
requires, among other things, that
FINRA rules must be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, and, in
general, to protect investors and the
public interest. FINRA believes that the
proposed rule change regarding options
on ETFs will promote consistent
regulation by harmonizing FINRA’s
position limits for options on ETFs with
those of the Options Exchanges and
clarifying the applicable position limits
for conventional options on ETFs. In
addition, FINRA believes that the
proposed rule change regarding options
discretionary accounts will clarify the
appropriate registration qualifications
that are required to approve and review
the approval of such accounts.
B. Self-Regulatory Organization’s
Statement of Burden on Competition
FINRA does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments Regarding the
Proposed Rule Changes Received From
Members, Participants or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Changes and Timing for
Commission Action
Because the foregoing rule change
does not: (1) Significantly affect the
protection of investors or the public
interest; (2) impose any significant
burden on competition; and (3) become
operative for 30 days after the date of
this filing, or such shorter time as the
13 15
E:\FR\FM\28MYN1.SGM
U.S.C. 78o–3(b)(6).
28MYN1
25586
Federal Register / Vol. 74, No. 101 / Thursday, May 28, 2009 / Notices
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 14 and Rule 19b–
4(f)(6) thereunder.15
A proposed rule change filed under
19b–4(f)(6) normally may not become
operative prior to 30 days after the date
of filing.16 However, Rule 19b–
4(f)(6)(iii) 17 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. FINRA
has requested that the Commission
waive the 30-day operative delay. The
Commission notes that FINRA’s
proposal is substantially similar to the
rules of the Options Exchanges and does
not raise any new substantive issues.18
The Commission believes that waiving
the 30-day operative delay is consistent
with the protection of investors and the
public interest because such waiver will
allow FINRA to harmonize its rules with
the rules of the Options Exchanges
without undue delay. The Commission
hereby grants FINRA’s request and
designates the proposal operative upon
filing.19
At any time within 60 days of the
filing of such 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 proposal 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
14 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
16 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule
19b–4(f)(6)(iii) requires that a self-regulatory
organization submit to the Commission written
notice of its intent to file the proposed rule change,
along with a brief description and text of the
proposed rule change, at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. FINRA has satisfied this notice
requirement.
17 Id.
18 See supra note 5 and 11.
19 For the 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).
15 17
VerDate Nov<24>2008
17:11 May 27, 2009
Jkt 217001
No. SR–FINRA–2009–032 on the subject
line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
[Release No. 34–59955; File No. SR–FINRA–
2009–012]
• 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 No.
SR–FINRA–2009–032. 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 changes 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 No.
SR–FINRA–2009–032 and should be
submitted on or before June 18, 2009.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–12311 Filed 5–27–09; 8:45 am]
BILLING CODE 8010–01–P
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Order Granting Accelerated Approval
of Proposed Rule Change, as Modified
by Amendment No. 1, To Implement an
Interim Pilot Program With Respect to
Margin Requirements for Certain
Transactions in Credit Default Swaps
May 22, 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 11,
2009, Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) (f/k/a
National Association of Securities
Dealers, Inc. (‘‘NASD’’)) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items substantially have
been prepared by FINRA. On May 19,
2009, FINRA submitted Amendment
No. 1 to the proposed rule change. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons and is
simultaneously approving the proposed
rule change as amended on an
accelerated basis to establish an interim
pilot program.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to adopt FINRA
Rule 4240 (Margin Requirements for
Credit Default Swaps). The proposed
rule would implement an interim pilot
program (the ‘‘Interim Pilot Program’’)
with respect to margin requirements for
transactions in credit default swaps
(‘‘CDS’’) executed by a member
(regardless of the type of account in
which the transaction is booked),
including those in which the offsetting
matching hedging transactions
(‘‘matching transactions’’) are effected
by the member in CDS contracts that are
cleared through the central counterparty
clearing services of the Chicago
Mercantile Exchange (the ‘‘CME’’). The
proposed rule would expire on
September 25, 2009.
The text of the proposed rule change
is available on FINRA’s Web site at
https://www.finra.org, at the principal
office of FINRA and at the
Commission’s Public Reference Room.
1 15
20 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00108
Fmt 4703
Sfmt 4703
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
E:\FR\FM\28MYN1.SGM
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]]>Agencies
[Federal Register Volume 74, Number 101 (Thursday, May 28, 2009)]
[Notices]
[Pages 25584-25586]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-12311]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59946; File No. SR-FINRA-2009-032]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of
Proposed Rule Change Relating to Amendments to FINRA Rule 2360
(Options) Regarding Position Limits for Options on Exchange-Traded
Funds and Registration Qualifications With Respect to Options
Discretionary Accounts
May 20, 2009.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on May 11, 2009, Financial Industry Regulatory Authority, Inc.
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc.
(``NASD'')) filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by FINRA. FINRA has designated
the proposed rule change as constituting a ``non-controversial'' rule
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which
renders the proposal effective upon receipt of this filing by the
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to amend FINRA Rule 2360 (Options) to (1)
establish higher position limits for options on selected exchange-
traded funds, (2) clarify the application of position limits to
conventional options on exchange-traded funds, and (3) clarify the
appropriate registration qualifications for accepting and reviewing the
acceptance of options discretionary accounts.
The text of the proposed rule change is available on FINRA's Web
site at https://www.finra.org, at the principal office of FINRA and at
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, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in Sections A,
B, and C below, of the most significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The proposed rule change would add Supplementary Material to FINRA
Rule 2360 (Options) to (1) establish higher position limits for options
on selected exchange-traded funds (``ETFs'') and (2) clarify the
application of position limits to conventional options on ETFs. In
addition, the proposed rule change would amend FINRA Rule 2360(b)(18)
to clarify the appropriate registration qualifications for accepting
and reviewing the acceptance of options discretionary accounts.
[[Page 25585]]
Options on ETFs. FINRA Rule 2360(b)(3) subjects standardized and
conventional options \4\ to one of five different position limits with
the maximum limit of 250,000 contracts. FINRA's position limits are
consistent with those of the Options Exchanges.\5\ The Options
Exchanges, however, have Supplementary Material that designates higher
position limits for options on selected ETFs. The position limit for
options on The DIAMONDS Trust (DIA) and the Standard and Poor's
Depositary Receipts Trust (SPY) is 300,000 contracts. The position
limit for options on The iShares Russell 2000 Index Fund (IWM) is
500,000 contracts, and the position limit for options on The
PowerShares QQQ Trust (QQQQ) is 900,000 contracts. FINRA proposes, in
accordance with Rule 2360(b)(3)(A)(vi), to establish the same position
limits on such options to ensure consistency with rules of the Options
Exchanges.
---------------------------------------------------------------------------
\4\ A ``conventional option'' is an option contract not issued,
or subject to issuance by, The Options Clearing Corporation. See
FINRA Rule 2360(a)(9). Currently, position limits for standardized
and conventional options are the same with respect to the same
underlying security.
\5\ See Rule 4.11 of the CBOE; Rule 412 of the ISE; Rule 1001 of
NASDAQ OMX PHLX; Rule 904 of NYSE AMEX; Rule 6.8 of NYSE Arca; and
Chapter III Section 7 of the BOX (collectively referred to as the
``Options Exchanges''). The Commission notes that the NASDAQ Options
Market (``NOM'') also is an options exchange that has position limit
rules that are consistent with the Options Exchanges. See Chapter
III, Section 7 of the NOM rules.
---------------------------------------------------------------------------
In addition, FINRA proposes to clarify that the position limits for
conventional options on ETFs should be the same as position limits for
other equity securities. Thus, if an ETF underlying a conventional
option also underlies a standardized option, then the position limit on
the conventional ETF option shall be the same as the position limit for
the standardized ETF option.\6\ However, if an ETF underlying a
conventional option does not also underlie a standardized option, then
the position limit for the conventional ETF option shall be the basic
limit of 25,000 contracts.\7\ In order for such a conventional ETF
option to qualify for a position limit greater than 25,000 contracts, a
member must apply for an increased position limit in accordance with
FINRA Rule 2360(b)(3)(A)(viii)b by first demonstrating to FINRA's
Market Regulation Department that the underlying ETF security meets the
standards for such higher options position limit and the initial
listing standards for standardized options trading.
---------------------------------------------------------------------------
\6\ Since 1999, FINRA has maintained position limit parity
between conventional and standardized options on the same security.
See Securities Exchange Act Release No. 40932 (January 11, 1999), 64
FR 2930, 2931 (January 19, 1999). Prior to 1999, position limits on
conventional options were three times greater than the limits for
standardized options. See Securities Exchange Act Release No. 40087
(June 12, 1998), 63 FR 33746 (June 19, 1998).
\7\ See FINRA Rule 2360(b)(3)(A)(viii)a.1. Conventional options
are generally subject to a position limit equal to the greater of
(i) the basic limit of 25,000 contracts or (ii) any standardized
option position limit as set forth in Rule 2360(b)(3)(A)(ii) through
(v) (i.e., 50,000 to 250,000 contracts) for which the underlying
security qualifies.
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Options Discretionary Accounts. On November 12, 2008, the SEC
approved SR-FINRA-2008-032 (the ``Options Transfer Filing''), which
adopted NASD Rules 2840 through 2853 regarding Trading in Index
Warrants, Currency Index Warrants and Currency Warrants, 2860
(Options), and 2865 (Security Futures) as FINRA Rules in the
consolidated FINRA rulebook.\8\ The Options Transfer Filing renumbered
NASD Rules 2840 through 2853 as FINRA Rules 2350 through 2359, NASD
Rule 2860 as FINRA Rule 2360 and NASD Rule 2865 as FINRA Rule 2370 in
the consolidated FINRA rulebook. The FINRA rules became effective on
February 17, 2009.\9\
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\8\ See Securities Exchange Act Release No. 58932 (November 12,
2008), 73 FR 69696 (November 19, 2008) (Notice of Filing of
Amendment No. 1 and Order Granting Accelerated Approval to a
Proposed Rule Change, as Modified by Amendment No. 1; File No. SR-
FINRA 2008-032).
\9\ See Regulatory Notice 08-78 (December 2008) (SEC Approves
New Consolidated FINRA Rules).
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In response to a comment letter to the Options Transfer Filing,\10\
FINRA proposed in Amendment No. 1, consistent with the rules of the
Chicago Board Options Exchange (``CBOE''), to amend FINRA Rule
2360(b)(18) to permit greater flexibility and allow a Limited
Principal-General Securities Sales Supervisor (``LP-GSSS'') (Series 9/
10) in addition to a Registered Options Principal (``ROP'') (Series 4)
to accept an options discretionary account.\11\ Also, consistent with
the CBOE provision, FINRA retained the requirement that the review of
the acceptance of a discretionary options account may only be performed
by a ROP (Series 4).\12\ FINRA proposes to amend FINRA Rule
2360(b)(18)(A)(i)b and (b)(18)(A)(ii) to ensure that the rule text more
clearly reflects the policy approved in the Options Transfer Filing
that either a ROP (Series 4) or a LP-GSSS (Series 9/10) may accept an
options discretionary account, but that the review of the acceptance
must be performed by a ROP (Series 4).
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\10\ See Letter from Melissa MacGregor, Vice President and
Assistant General Counsel, Securities Industry and Financial Markets
Association, to Florence E. Harmon, Acting Secretary, SEC, dated
September 4, 2008.
\11\ See CBOE Rule 9.2.01 specifying that Options Principals are
qualified by passing either the Series 4 or the Series 9/10 and CBOE
Rule 9.2.02 specifying that the review of the acceptance of a
discretionary account must be performed by a Series 4 qualified
individual.
\12\ FINRA would leave unchanged the requirement that ``frequent
supervisory review by a ROP who is not exercising the discretionary
authority'' should be performed by a ROP (Series 4) as stated in
Amendment No. 1 to the Options Transfer Filing.
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FINRA has filed the proposed rule change for immediate
effectiveness and has requested that the SEC waive the requirement that
the proposed rule change not become operative for 30 days after the
date of the filing, such that FINRA can implement the proposed rule
change immediately.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\13\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. FINRA believes that the proposed rule change regarding
options on ETFs will promote consistent regulation by harmonizing
FINRA's position limits for options on ETFs with those of the Options
Exchanges and clarifying the applicable position limits for
conventional options on ETFs. In addition, FINRA believes that the
proposed rule change regarding options discretionary accounts will
clarify the appropriate registration qualifications that are required
to approve and review the approval of such accounts.
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\13\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement of Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments Regarding the
Proposed Rule Changes Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Changes and Timing for
Commission Action
Because the foregoing rule change does not: (1) Significantly
affect the protection of investors or the public interest; (2) impose
any significant burden on competition; and (3) become operative for 30
days after the date of this filing, or such shorter time as the
[[Page 25586]]
Commission may designate, it has become effective pursuant to Section
19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under 19b-4(f)(6) normally may not
become operative prior to 30 days after the date of filing.\16\
However, Rule 19b-4(f)(6)(iii) \17\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. FINRA has requested that the
Commission waive the 30-day operative delay. The Commission notes that
FINRA's proposal is substantially similar to the rules of the Options
Exchanges and does not raise any new substantive issues.\18\ The
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest
because such waiver will allow FINRA to harmonize its rules with the
rules of the Options Exchanges without undue delay. The Commission
hereby grants FINRA's request and designates the proposal operative
upon filing.\19\
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\16\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to
the Commission written notice of its intent to file the proposed
rule change, along with a brief description and text of the proposed
rule change, at least five business days prior to the date of filing
of the proposed rule change, or such shorter time as designated by
the Commission. FINRA has satisfied this notice requirement.
\17\ Id.
\18\ See supra note 5 and 11.
\19\ For the 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 such 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 proposal 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-FINRA-2009-032 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 No. SR-FINRA-2009-032. 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 changes 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 No. SR-FINRA-2009-032 and should be
submitted on or before June 18, 2009.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-12311 Filed 5-27-09; 8:45 am]
BILLING CODE 8010-01-P
