Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt FINRA Rule 4210 (Margin Requirements), FINRA Rule 4220 (Daily Record of Required Margin) and FINRA Rule 4230 (Required Submissions for Requests for Extensions of Time Under Regulation T and SEC Rule 15c3-3) in the Consolidated FINRA Rulebook, 32519-32523 [2010-13662]
Download as PDF
Federal Register / Vol. 75, No. 109 / Tuesday, June 8, 2010 / Notices
Issued in Washington, DC, June 2, 2010.
John H. Hanley,
Director, Legislative and Regulatory
Department, Pension Benefit Guaranty
Corporation.
[FR Doc. 2010–13654 Filed 6–7–10; 8:45 am]
BILLING CODE 7709–01–P
SMALL BUSINESS ADMINISTRATION
Small Business Size Standards:
Waiver of the Nonmanufacturer Rule
Small Business Administration.
Notice of Waiver to the
Nonmanufacturer Rule for Liquid
Propane Gas (LPG), North American
Industry Classification System (NAICS)
code 325120, Product Service Code
(PSC) 6830.
AGENCY:
ACTION:
SUMMARY: The U. S. Small Business
Administration (SBA) is granting a
waiver of the Nonmanufacturer Rule for
Liquid Propane Gas. The basis for
waiver is that no small business
manufacturers are supplying this class
of product to the Federal Government.
The effect of a waiver would be to allow
otherwise qualified small businesses to
supply the products of any
manufacturer on a Federal contract set
aside for small businesses, servicedisabled veteran-owned (SDVO) small
businesses or Participants in SBA’s 8(a)
Business Development (BD) Program.
DATES: This waiver is effective June 23,
2010.
FOR FURTHER INFORMATION CONTACT: Ms.
Amy Garcia, Procurement Analyst, by
telephone at (202) 205–6842; by Fax at
(202) 481–1630; or by e-mail at
amy.garcia@sba.gov.
Section
8(a)(17) of the Small Business Act (Act),
15 U.S.C. 637(a)(17), and SBA’s
implementing regulations require that
recipients of Federal supply contracts
set aside for small businesses, SDVO
small businesses, or Participants in the
SBA’s 8(a) BD Program must provide the
product of a small business
manufacturer or processor, if the
recipient is other than the actual
manufacturer or processor of the
product. This requirement is commonly
referred to as the Nonmanufacturer
Rule. 13 CFR 121.406(b), 125.15(c).
Section 8(a)(17)(b)(iv) of the Act
authorizes SBA to waive the
Nonmanufacturer Rule for any ‘‘class of
products’’ for which there are no small
business manufacturers or processors
available to participate in the Federal
market.
In order to be considered available to
participate in the Federal market for a
emcdonald on DSK2BSOYB1PROD with NOTICES
SUPPLEMENTARY INFORMATION:
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32519
class of products, a small business
manufacturer must have submitted a
proposal for a contract solicitation or
received a contract from the Federal
Government within the last 24 months.
13 CFR 121.1202(c). The SBA defines
‘‘class of products’’ based on the Office
of Management and Budget’s NAICS. In
addition, SBA uses PSCs to further
identify particular products within the
NAICS code to which a waiver would
apply.
The SBA received a request on
December 10, 2010, to waive the
Nonmanufacturer Rule for LPG, PSC
6830 (Compressed and Liquefied Gases),
under NAICS code 325120 (Industrial
Gases Manufacturing).
On March 23, 2010, SBA published in
the Federal Register a notice of intent
to waive the Nonmanufacturer Rule for
the above listed item. SBA explained in
the notice that it was soliciting
comments and sources of small business
manufacturers of this class of products.
No comments were received in response
to this notice. SBA has determined that
there are no small business
manufacturers of this class of products,
and is therefore granting the waiver of
the Nonmanufacturer Rule for LPG, PSC
6830 (Compressed and Liquefied Gases),
under NAICS code 325120 (Industrial
Gases Manufacturing).
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of MPEL
Holdings Corp. (f/k/a Computer
Transceiver Systems, Inc.) because it
has not filed any periodic reports since
September 30, 1999.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of MR3
Systems, Inc. because it has not filed
any periodic reports since the period
ended September 30, 2005.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Mutual Risk
Management Ltd. because it has not
filed any periodic reports since the
period ended December 31, 2001.
The Commission is of the opinion that
the public interest and the protection of
investors require a suspension of trading
in the securities of the above-listed
companies.
Therefore, it is ordered, pursuant to
Section 12(k) of the Securities Exchange
Act of 1934, that trading in the
securities of the above-listed companies
is suspended for the period from 9:30
a.m. EDT on June 4, 2010, through 11:59
p.m. EDT on June 17, 2010.
Dated: June 1, 2010.
Karen Hontz,
Director, Office of Government Contracting.
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010–13652 Filed 6–7–10; 8:45 am]
[FR Doc. 2010–13823 Filed 6–4–10; 4:15 pm]
BILLING CODE 8025–01–P
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62205; File No. SR–FINRA–
2010–024]
[File No. 500–1]
Miracor Diagnostics, Inc., Monaco
Finance, Inc., MPEL Holdings Corp.
(f/k/a Computer Transceiver Systems,
Inc.), MR3 Systems, Inc., Mutual Risk
Management, Ltd.; Order of
Suspension of Trading
June 4, 2010.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Miracor
Diagnostics, Inc. because it has not filed
any periodic reports since the period
ended September 30, 1996.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Monaco
Finance, Inc. because it has not filed
any periodic reports since the period
ended September 30, 1999.
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Fmt 4703
SECURITIES AND EXCHANGE
COMMISSION
Sfmt 4703
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Proposed Rule Change To Adopt
FINRA Rule 4210 (Margin
Requirements), FINRA Rule 4220 (Daily
Record of Required Margin) and FINRA
Rule 4230 (Required Submissions for
Requests for Extensions of Time
Under Regulation T and SEC Rule
15c3–3) in the Consolidated FINRA
Rulebook
June 2, 2010.
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 May 14,
2010, Financial Industry Regulatory
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
08JNN1
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Federal Register / Vol. 75, No. 109 / Tuesday, June 8, 2010 / Notices
Authority, Inc. (‘‘FINRA’’) (f/k/a
National Association of Securities
Dealers, Inc. (‘‘NASD’’)) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by FINRA. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
emcdonald on DSK2BSOYB1PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to adopt (1)
NASD Rules 2520, 2521, 2522, and IM–
2522 regarding margin requirements, (2)
NASD Rule 3160 regarding extension of
time requests under Regulation T and
SEC Rule 15c3–3, and (3) Incorporated
NYSE Rule 432(a) regarding daily record
of margin requirements as FINRA rules
in the consolidated FINRA rulebook,
subject to certain amendments, and to
delete Incorporated NYSE Rule 431
(Margin Requirements), Incorporated
NYSE Rule 431 Interpretations,3
Incorporated NYSE Rule 432(b) and
Incorporated NYSE Rule 434 (Required
Submissions of Requests for Extension
of Time for Customers). The proposed
rule change would (1) Consolidate and
renumber NASD Rules 2520, 2521, 2522
and IM–2522 as FINRA Rule 4210
(Margin Requirements), (2) renumber
NASD Rule 3160 as FINRA Rule 4230
(Required Submissions for Requests for
Extensions of Time Under Regulation T
and SEC Rule 15c3–3), and (3) renumber
Incorporated NYSE Rule 432(a) as
FINRA Rule 4220 (Daily Record of
Required Margin) in the consolidated
FINRA rulebook.
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
aspects of such statements
3 Assuming
SEC approval of the proposed rule
change, FINRA expects to maintain the
Incorporated NYSE Rule 431 Interpretations as
interpretations to FINRA Rule 4210.
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16:31 Jun 07, 2010
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
As part of the process of developing
a new consolidated rulebook
(‘‘Consolidated FINRA Rulebook’’),4
FINRA is proposing to adopt (1) NASD
Rules 2520, 2521, 2522, and IM–2522
regarding margin requirements, (2)
NASD Rule 3160 regarding extension of
time requests under Regulation T and
SEC Rule 15c3–3, and (3) Incorporated
NYSE Rule 432(a) regarding daily record
of margin requirements as FINRA rules
in the Consolidated FINRA Rulebook,
subject to certain amendments, and to
delete Incorporated NYSE Rule 431
(Margin Requirements), Incorporated
NYSE Rule 431 Interpretations,5
Incorporated NYSE Rule 432(b) and
Incorporated NYSE Rule 434 (Required
Submissions of Requests for Extension
of Time for Customers). The proposed
rule change would (1) consolidate and
renumber NASD Rules 2520, 2521, 2522
and IM–2522 as FINRA Rule 4210
(Margin Requirements), (2) renumber
NASD Rule 3160 as FINRA Rule 4230
(Required Submissions for Requests for
Extensions of Time Under Regulation T
and SEC Rule 15c3–3), and (3) renumber
Incorporated NYSE Rule 432(a) as
FINRA Rule 4220 (Daily Record of
Required Margin) in the Consolidated
FINRA Rulebook.
Margin Requirements—NASD Rules
2520, 2521, 2522, and IM–2522 and
Incorporated NYSE Rule 431
FINRA proposes to adopt the margin
requirements set forth in NASD Rules
2520 through 2522 and IM–2522 as
FINRA Rule 4210, subject to certain
amendments, discussed below and to
delete Incorporated NYSE Rule 431
(Margin Requirements). The proposed
amendments, among other things,
reflect certain requirements in
Incorporated NYSE Rule 431.
NASD Rule 2520 (Margin
Requirements) and Incorporated NYSE
Rule 431, which are almost identical,
4 The current FINRA rulebook consists of (1)
FINRA Rules; (2) NASD Rules; and (3) rules
incorporated from NYSE (‘‘Incorporated NYSE
Rules’’) (together, the NASD Rules and Incorporated
NYSE Rules are referred to as the ‘‘Transitional
Rulebook’’). While the NASD Rules generally apply
to all FINRA members, the Incorporated NYSE
Rules apply only to those members of FINRA that
are also members of the NYSE (‘‘Dual Members’’).
The FINRA Rules apply to all FINRA members,
unless such rules have a more limited application
by their terms. For more information about the
rulebook consolidation process, see FINRA
Information Notice, March 12, 2008 (Rulebook
Consolidation Process).
5 See supra note 3.
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Sfmt 4703
prescribe requirements governing the
extension of credit by members that
offer margin accounts to customers, as
generally permitted in accordance with
Regulation T of the Board of Governors
of the Federal Reserve System
(‘‘Regulation T’’).6 These rules
promulgate the margin requirements
that determine the amount of collateral
customers are expected to maintain in
their margin accounts, including
strategy-based margin accounts and
portfolio margin accounts. Maintenance
margin requirements for equity, fixed
income, warrants and option securities
also are established under these rules.
Rule Structure
FINRA proposes to combine NASD
Rules 2520, 2521, 2522 and IM–2522
into the single consolidated margin rule,
FINRA Rule 4210. In addition, FINRA
proposes to re-structure the rule to
improve its organization and make it
easier to read. First, FINRA proposes to
incorporate NASD Rule 2521 (Margin—
Exemption for Certain Members) as
FINRA Rule 4210(h), which provides
that any member for which another selfregulatory organization acts as the
designated examining authority is
exempt from FINRA Rule 4210. Second,
FINRA proposes to incorporate NASD
Rule 2522 (Definitions Related to
Options, Currency Warrants, Currency
Index Warrants and Stock Index
Warrant Transactions) as FINRA Rule
4210(f)(2)(A), which contains
definitions regarding margining options,
currency warrants, currency index
warrants and stock index warrant
transactions.7 In so doing, FINRA
proposes to delete extraneous
definitions and retain only those
definitions that are pertinent to the new
rule. Third, FINRA proposes to combine
the margin provisions regarding
currency warrants, currency index
warrants and stock index warrants from
NASD Rule 2520(f)(10) together with
similar sections in paragraph (f)(2) of
FINRA Rule 4210. All margin provisions
regarding such warrants were combined
in a single section in corresponding
Incorporated NYSE Rule 431(f)(2), and
FINRA proposes to follow this model.
FINRA believes combining all
provisions in a single section regarding
such warrants will make the rule easier
to read. Finally, FINRA proposes to
incorporate NASD IM–2522
(Computation of Elapsed Days) as
Supplementary Material to FINRA Rule
6 See
Regulation T Section 220.4.
this regard, FINRA proposes to adopt the
model of Incorporated NYSE Rule 431 of
consolidating relevant definitions into FINRA Rule
4210.
7 In
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Federal Register / Vol. 75, No. 109 / Tuesday, June 8, 2010 / Notices
4210, which provides illustrations on
how to calculate the number of elapsed
days for accrued interest on Treasury
bonds or notes.
emcdonald on DSK2BSOYB1PROD with NOTICES
Net Capital Calculations
FINRA proposes in several instances
in FINRA Rule 4210 8 to specify that the
member should reference SEC Rule
15c3–1 and, if applicable, FINRA Rule
4110 (Capital Compliance) when
calculating net capital, charges against
net capital and haircut requirements.
Members that may be subject to greater
net capital requirements pursuant to
FINRA Rule 4110 would need to ensure
they are in compliance with both the
SEC and FINRA net capital provisions
in calculating net capital and its impact
on margin calculations. In addition,
consistent with the corresponding
Incorporated NYSE Rule 431
requirements, FINRA proposes to
provide in FINRA Rule 4210(e)(5)(A)
and (B) (regarding specialists’ and
market makers’ accounts), (e)(6)(A)
(regarding broker-dealer accounts) and
(e)(6)(B)(i)c. (regarding joint back office
arrangements) that when computing
charges against net capital for
transactions in securities covered by
FINRA Rule 4210(e)(2)(F) (regarding
transactions with exempt accounts
involving certain ‘‘good faith’’ securities)
and FINRA Rule 4210(e)(2)(G)
(regarding transactions with exempt
accounts involving highly rated foreign
sovereign debt securities and
investment grade debt securities), absent
a greater haircut requirement that may
have been imposed on such securities
pursuant to FINRA Rule 4110(a), the
respective requirements of those
paragraphs may be used, rather than the
haircut requirements of SEC Rule 15c3–
1.
Joint Accounts Exemption
FINRA proposes to integrate
Incorporated NYSE Rule 431
Supplementary Material .10 into FINRA
Rule 4210(e)(3) regarding joint accounts
in which the carrying member or a
partner or stockholder therein has an
interest. The provision permits a
member to seek an exemption under the
FINRA Rule 9600 Series if the account
is confined exclusively to transactions
and positions in exempted securities.
The proposed rule change would
provide that any such application shall
include the complete description of the
security; cost price, offering price and
principal amount of obligations which
8 See, e.g., FINRA Rule 4210(e)(2)(D), (e)(2)(F),
(e)(2)(G), (e)(4), (e)(5) and (e)(6). Incorporated NYSE
Rule 431 referenced NYSE’s net capital rules in
these same sections, and FINRA proposes to follow
this model.
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16:31 Jun 07, 2010
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have been purchased or may be required
to be purchased; the date on which the
security is to be purchased or on which
there will be a contingent commitment
to purchase the security; the
approximate aggregate indebtedness; the
approximate net capital; and the
approximate total market value of all
readily marketable securities (1)
exempted and (2) non-exempted, held
in member accounts, partners’ capital
accounts, partners’ individual accounts
covered by approved agreements
providing for their inclusion as
partnership property, accounts covered
by subordination agreements approved
by FINRA and customers’ accounts in
deficit.
Additional Requirements on Control
and Restricted Securities and
Relationship to FINRA Rule 4120
(Regulatory Notification and Business
Curtailment)
FINRA proposes to adopt provisions
from Incorporated NYSE Rule 431
pertaining to deductions from net
capital on control and restricted
securities, which are not contained in
NASD Rule 2520.9 These provisions,
which would be set forth in FINRA Rule
4210(e)(8)(C)(ii), (iii) and (v), require
that a member make deductions from its
net capital if it extends credit over
specified thresholds, discussed below,
on control and restricted securities, and
it must take such deductions into
account when determining if it has
reached any of the financial triggers
specified in FINRA Rule 4120.10 The
proposed rule change also would make
conforming amendments to FINRA Rule
4120(a)(1)(F) and (c)(1)(F) (Regulatory
Notification and Business Curtailment)
to clarify that a member must take into
account the special deductions from net
capital set forth in FINRA Rule
4210(e)(8)(C) in determining its status
under FINRA Rule 4120. The margin
provision specifically provides that the
greater of the aggregate credit agreed to
be extended in writing or the aggregate
credit that is actually extended to all
customers on control and restricted
securities of any one issue that exceeds
10 percent of the member’s excess net
capital shall be deducted from net
capital for purposes of determining a
member’s status under FINRA Rule
9 See Incorporated NYSE Rule 431(e)(8)(C)(ii), (iii)
and (v).
10 FINRA Rule 4120 is based on Incorporated
NYSE Rules 325 and 326, which were referenced
in Incorporated NYSE Rule 431(e)(8)(C)(ii), (iii) and
(v). FINRA Rule 4120 requires carrying and clearing
members to notify FINRA if any of the specified
financial triggers in FINRA Rule 4120 are reached.
The rule also addresses circumstances under which
a member would be prohibited from expanding its
business or required to reduce its business.
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Fmt 4703
Sfmt 4703
32521
4120. The amount of such aggregate
credit extended, which has been
deducted in computing net capital
under SEC Rule 15c3–1 and, if
applicable, FINRA Rule 4110(a), need
not be included in this calculation.
FINRA, upon written application, may
reduce the deduction to net capital
under FINRA Rule 4120 to 25 percent of
such aggregate credit extended that
exceeds 10 percent but is less than 15
percent of the member’s excess net
capital. In addition, the aggregate credit
extended to all customers on all control
and restricted securities (reduced by the
amount of such aggregate credit which
has been deducted in computing net
capital under SEC Rule 15c3–1 and, if
applicable, FINRA Rule 4110(a)), shall
be deducted from net capital on the
following basis for purposes of
determining a member’s status under
FINRA Rule 4120. First, to the extent
such net amount of credit extended does
not exceed 50 percent of a member’s
excess net capital, 25 percent of such
net amount of credit extended shall be
deducted. Second, 100 percent of such
net amount of credit extended which
exceeds 50 percent of a member’s excess
net capital shall be deducted. The
amount to be deducted from net capital
for purposes of determining a member’s
status under Rule 4120 shall not exceed
100 percent of the aggregate credit
extended reduced by any amount
deducted in computing net capital
under SEC Rule 15c3–1 and, if
applicable, Rule 4110(a).
Day Trading
FINRA proposes to adopt
Supplementary Material .30 and .60
from Incorporated NYSE Rule 431
regarding day trading in proposed
FINRA Rule 4210(f)(8)(B). FINRA
proposes to integrate Supplementary
Material .60 from Incorporated NYSE
Rule 431 in FINRA Rule
4210(f)(8)(B)(iii) to provide that the daytrading buying power for non-equity
securities may be computed using the
applicable special maintenance margin
requirements pursuant to other
provisions of the margin rule. In
addition, FINRA proposes to adopt
Supplementary Material .30 from
Incorporated NYSE Rule 431 as FINRA
Rule 4210(f)(8)(B)(iv)b. to provide that
in the event that the member at which
a customer seeks to open an account or
resume day trading in an existing
account, knows or has a reasonable
basis to believe that the customer will
engage in pattern day trading, then the
minimum equity required ($25,000)
must be deposited in the account prior
to commencement of day trading.
FINRA also proposes to relocate
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Federal Register / Vol. 75, No. 109 / Tuesday, June 8, 2010 / Notices
paragraph (f)(8)(C) of NASD Rule 2520
into FINRA Rule 4210(f)(8)(B)(iii) that
specifies that day trading deficiencies
must be met within five business days
of the trade date.
Portfolio Margining
FINRA proposes to amend FINRA
Rule 4210(g)(5) to highlight to members
that portfolio margin-eligible
participants, in addition to being
required to be approved to engage in
uncovered short option contracts
pursuant to FINRA Rule 2360, must be
approved to engage in security futures
transactions pursuant to FINRA Rule
2370.
Conforming Amendments
FINRA proposes to add the terms
‘‘approved market maker,’’ ‘‘market
maker’’ and ‘‘market making’’ to FINRA
Rule 4210(f)(10)(F) to conform to rule
changes made by the NYSE.11 The
NYSE changes were made in connection
with the operation of the NYSE’s Market
Model.12 As a result of the
implementation of these changes, the
NYSE amended several of its rules,
including NYSE Rule 431(f)(10)(F), to
add the terms ‘‘approved market maker,’’
‘‘market maker’’ and ‘‘market making’’ to
reflect the current DMMs operating on
the NYSE. FINRA also proposes
amending the definitions of the same
terms used in FINRA Rule 4210(e)(5)(A)
and (f)(10)(E) for consistency purposes.
emcdonald on DSK2BSOYB1PROD with NOTICES
Clarifying and Technical Amendments
Finally, FINRA proposes to make
several technical changes to the margin
11 See Securities Exchange Act Release No. 59077
(December 10, 2008), 73 FR 76691 (December 17,
2008) (Notice of Filing and Immediate Effectiveness
of Proposed Rule Change by New York Stock
Exchange LLC Amending Exchange Rule 104T to
Make a Technical Amendment to Delete Language
Relating to Orders Received by NYSE Systems and
DMM Yielding; Clarifying the Duration of the
Provisions of Rule 104T; Making Technical
Amendments to Rule 98 and Rule 123E to Update
Rule References for DMM Net Capital
Requirements; Rescinding Paragraph (g) of Rule
123; and Making Conforming Changes to Certain
Exchange Rules to Replace the Term ‘‘Specialist’’
with ‘‘DMM’’; File No. SR–NYSE–2008–127).
12 See Securities Exchange Act Release No. 58845
(October 24, 2008), 73 FR 64379 (October 29, 2008)
(SEC Approval Order of SR–NYSE–2008–46
approving certain rules to operate as a pilot
scheduled to end October 1, 2009); see also
Securities Exchange Act Release No. 60756 (October
1, 2009), 74 FR 51628 (October 7, 2009) (SR–NYSE–
2009–100); Securities Exchange Act Release No.
61031 (November 19, 2009), 74 FR 62368
(November 27, 2009); and Securities Exchange Act
Release No. 61724 (March 17, 2010), 75 FR 14221
(March 24, 2010) (extending the operation of the
pilot until the earlier of the SEC approval to make
permanent or September 30, 2010). As part of this
new model, the functions formerly carried out by
specialists on the NYSE were replaced by a new
market participant, known as a Designated Market
Maker (‘‘DMM’’).
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16:31 Jun 07, 2010
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rule text to update terminology and
similar clarifications. First, FINRA
proposes to add definitions to FINRA
Rule 4210(f)(2)(A) regarding ‘‘listed’’ and
‘‘OTC’’ options and employ such terms
throughout FINRA Rule 4210(f)(2).13
FINRA is not proposing any substantive
changes to the margin requirements for
listed or over-the-counter options;
rather, the proposed rule change would
make the rule easier to read by creating
such definitions and using the terms
consistently throughout the rule text.
Second, in proposed FINRA Rule
4210(f)(2)(I)(iv), FINRA proposes several
clarifications to terminology where no
margin may be required if the specified
options or warrants are carried ‘‘short’’
in the account of a customer, against an
escrow agreement, and either are held in
the account at the time the options or
warrants are written, or received in the
account promptly thereafter. The
proposed rule change would clarify that
with respect to such options or
warrants, an escrow agreement is used,
in a form satisfactory to FINRA, issued
by a third party custodian bank or trust
company, and in compliance with the
requirements of Rule 610 of The
Options Clearing Corporation. The
corresponding provisions in
Incorporated NYSE Rule 43114 used the
terms ‘‘letter of guarantee’’ and ‘‘escrow
receipt’’ while NASD Rule 2520 used the
term ‘‘letter of guarantee.’’ While in this
context such terms generally were used
interchangeably, FINRA proposes to use
the term ‘‘escrow agreement’’ to
eliminate any potential confusion.15
The proposed rule change also would
replace the term ‘‘guarantor’’ with the
term ‘‘custodian’’ to more accurately
reflect the third party’s role. In addition,
the proposed rule change would revise
the definition of what constitutes a
qualified security by eliminating the
reference to the list of Over-the-Counter
Margin Stocks published by the Board
of Governors of the Federal Reserve
System as the Federal Reserve no longer
publishes such a list.
Third, the proposed rule change
would insert the term ‘‘aggregate’’ before
exercise price throughout proposed
13 The term ‘‘listed’’ as used with reference to a
call or put option contract would mean an option
contract that is traded on a national securities
exchange and issued and guaranteed by a registered
clearing agency. The term ‘‘OTC’’ as used with
reference to a call or put option contract would
mean an over-the-counter option contract that is not
traded on a national securities exchange and is
issued and guaranteed by the carrying brokerdealer. Accordingly, the proposed rule change
would delete as unnecessary certain descriptive
references in NASD Rule 2520(f)(2) to listed and
OTC options.
14 See Incorporated NYSE Rule 431(f)(2)(H)(iv).
15 Such approach also is consistent with the
CBOE rules. See CBOE Rule 12.3(d).
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Fmt 4703
Sfmt 4703
FINRA Rule 4210(f)(2)(H) and (f)(2)(N)
to clarify a calculation must be made in
the strategies and spreads that are noted
(i.e., offsets, reverse conversions,
butterfly spread, etc.). Finally, the
proposed rule change would make
various non-substantive changes to
reflect the formatting, presentation and
style conventions used in the
Consolidated FINRA Rulebook.
Daily Record of Margin Requirements—
Incorporated NYSE Rule 432(a)
FINRA proposes to adopt
Incorporated NYSE Rule 432(a) (Daily
Record of Required Margin) as FINRA
Rule 4220 in substantially the form it
exists today. Incorporated NYSE Rule
432(a) sets forth the requirements for
daily recordkeeping of initial and
maintenance margin calls that are
issued pursuant to Regulation T and the
margin rules. There is no corresponding
NASD rule. FINRA believes that this is
an important requirement to heighten
FINRA’s ability to monitor members’
margin call practices. In addition,
Incorporated NYSE Rule 432(b)
prohibits a member from allowing a
customer to make a practice of satisfying
initial margin calls by the liquidation of
securities. However, this provision is
substantially similar to the provision in
proposed FINRA Rule 4210(f)(7), except
that the proposed FINRA rule provision
does not contain the exception for
omnibus accounts. Accordingly, FINRA
proposes to eliminate Incorporated
NYSE Rule 432(b) and modify
paragraph (f)(7) of FINRA Rule 4210 to
add that the prohibition on liquidations
shall not apply to any account carried
on an omnibus basis as prescribed by
Regulation T.
Required Submissions of Requests for
Extension of Time Under Regulation T
and SEC Rule 15c3–3—NASD Rule 3160
and Incorporated NYSE Rule 434
FINRA proposes to adopt NASD Rule
3160 (Extensions of Time Under
Regulation T and SEC Rule 15c3–3) as
FINRA Rule 4230 with one modification
discussed below and delete the
substantively similar Incorporated
NYSE Rule 434 (Required Submission of
Requests for Extensions of Time for
Customers). NASD Rule 3160 and
Incorporated NYSE Rule 434 set forth
requirements governing members’
requests for extensions of time, as
permitted in accordance with
Regulation T and SEC Rule 15c3–3(n).
These rules provide that when FINRA is
the designated examining authority for
a member, requests for extensions of
time must be submitted to FINRA for
approval, in a format FINRA requires. In
addition, NASD Rule 3160 requires each
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08JNN1
Federal Register / Vol. 75, No. 109 / Tuesday, June 8, 2010 / Notices
clearing member that submits
extensions of time on behalf of brokerdealers for which it clears to submit a
monthly report to FINRA that indicates
overall ratios of requested extensions of
time to total transactions that have
exceeded a percentage specified by
FINRA.16 FINRA monitors the number
of Regulation T and SEC Rule 15c3–3
extension requests for each firm to
determine whether to impose
prohibitions on further extensions of
time.17
FINRA proposes to add a provision to
proposed FINRA Rule 4230 to clarify
that for the months when no brokerdealer for which a clearing member
clears exceeds the extension of time
ratio criteria (i.e., 2%), the clearing
member must submit a report indicating
such. FINRA had previously requested
such submissions but believes the
submissions are essential to ensure
FINRA has a complete and accurate
understanding of correspondent firm
extension requests.
As noted above, FINRA will announce
the implementation date of the
proposed rule change in a Regulatory
Notice to be published no later than 90
days following Commission approval.
The implementation date will be no
later than 180 days following
Commission approval.
2. Statutory Basis
emcdonald on DSK2BSOYB1PROD with NOTICES
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,18 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 will clarify and
streamline the margin requirements
applicable to its members, as well as
those rules addressing extension of time
requests under Regulation T and SEC
Rule 15c3–3.
16 See Notice to Members 06–62 (November 2006).
FINRA would retain the reporting threshold
specified in Notice to Members 06–62 of requiring
a report for all introducing or correspondent firms
that have overall ratios of requests for extensions of
time to total transactions for the month that exceed
2%. In the event FINRA adjusts the reporting
threshold, or the limitation threshold stated in note
16 below, it would advise members of the new
parameters in a Regulatory Notice.
17 See supra note 15. FINRA will continue to
prohibit further extension of time requests for (1)
introducing or correspondent firms that exceed a
3% ratio of the number of extension of time
requests to total transactions for the month and (2)
clearing firms that exceed a 1% ratio of extension
of time requests to total transactions.
18 15 U.S.C. 78o–3(b)(6).
VerDate Mar<15>2010
16:31 Jun 07, 2010
Jkt 220001
B. Self-Regulatory Organization’s
Statement on Burden on Competition
FINRA does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve such proposed
rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
32523
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 Web site viewing and
printing 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–2010–024 and
should be submitted on or before June
29, 2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Florence E. Harmon,
Deputy Secretary.
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:
[FR Doc. 2010–13662 Filed 6–7–10; 8:45 am]
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
Number SR–FINRA–2010–024 on the
subject line.
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Related to Eligible Order
Types
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–FINRA–2010–024. 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
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BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62204; File No. SR–CBOE–
2010–049]
June 2, 2010.
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 25,
2010, the Chicago Board Options
Exchange, Incorporated (‘‘Exchange’’ or
‘‘CBOE’’) filed with the Securities and
Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\08JNN1.SGM
08JNN1
Agencies
[Federal Register Volume 75, Number 109 (Tuesday, June 8, 2010)]
[Notices]
[Pages 32519-32523]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-13662]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62205; File No. SR-FINRA-2010-024]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt
FINRA Rule 4210 (Margin Requirements), FINRA Rule 4220 (Daily Record of
Required Margin) and FINRA Rule 4230 (Required Submissions for Requests
for Extensions of Time Under Regulation T and SEC Rule 15c3-3) in the
Consolidated FINRA Rulebook
June 2, 2010.
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 May 14, 2010, Financial Industry Regulatory
[[Page 32520]]
Authority, Inc. (``FINRA'') (f/k/a National Association of Securities
Dealers, Inc. (``NASD'')) filed with the Securities and Exchange
Commission (``SEC'' or ``Commission'') the proposed rule change as
described in Items I, II, and III below, which Items have been prepared
by FINRA. 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to adopt (1) NASD Rules 2520, 2521, 2522, and
IM-2522 regarding margin requirements, (2) NASD Rule 3160 regarding
extension of time requests under Regulation T and SEC Rule 15c3-3, and
(3) Incorporated NYSE Rule 432(a) regarding daily record of margin
requirements as FINRA rules in the consolidated FINRA rulebook, subject
to certain amendments, and to delete Incorporated NYSE Rule 431 (Margin
Requirements), Incorporated NYSE Rule 431 Interpretations,\3\
Incorporated NYSE Rule 432(b) and Incorporated NYSE Rule 434 (Required
Submissions of Requests for Extension of Time for Customers). The
proposed rule change would (1) Consolidate and renumber NASD Rules
2520, 2521, 2522 and IM-2522 as FINRA Rule 4210 (Margin Requirements),
(2) renumber NASD Rule 3160 as FINRA Rule 4230 (Required Submissions
for Requests for Extensions of Time Under Regulation T and SEC Rule
15c3-3), and (3) renumber Incorporated NYSE Rule 432(a) as FINRA Rule
4220 (Daily Record of Required Margin) in the consolidated FINRA
rulebook.
---------------------------------------------------------------------------
\3\ Assuming SEC approval of the proposed rule change, FINRA
expects to maintain the Incorporated NYSE Rule 431 Interpretations
as interpretations to FINRA Rule 4210.
---------------------------------------------------------------------------
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 aspects of such statements
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
As part of the process of developing a new consolidated rulebook
(``Consolidated FINRA Rulebook''),\4\ FINRA is proposing to adopt (1)
NASD Rules 2520, 2521, 2522, and IM-2522 regarding margin requirements,
(2) NASD Rule 3160 regarding extension of time requests under
Regulation T and SEC Rule 15c3-3, and (3) Incorporated NYSE Rule 432(a)
regarding daily record of margin requirements as FINRA rules in the
Consolidated FINRA Rulebook, subject to certain amendments, and to
delete Incorporated NYSE Rule 431 (Margin Requirements), Incorporated
NYSE Rule 431 Interpretations,\5\ Incorporated NYSE Rule 432(b) and
Incorporated NYSE Rule 434 (Required Submissions of Requests for
Extension of Time for Customers). The proposed rule change would (1)
consolidate and renumber NASD Rules 2520, 2521, 2522 and IM-2522 as
FINRA Rule 4210 (Margin Requirements), (2) renumber NASD Rule 3160 as
FINRA Rule 4230 (Required Submissions for Requests for Extensions of
Time Under Regulation T and SEC Rule 15c3-3), and (3) renumber
Incorporated NYSE Rule 432(a) as FINRA Rule 4220 (Daily Record of
Required Margin) in the Consolidated FINRA Rulebook.
---------------------------------------------------------------------------
\4\ The current FINRA rulebook consists of (1) FINRA Rules; (2)
NASD Rules; and (3) rules incorporated from NYSE (``Incorporated
NYSE Rules'') (together, the NASD Rules and Incorporated NYSE Rules
are referred to as the ``Transitional Rulebook''). While the NASD
Rules generally apply to all FINRA members, the Incorporated NYSE
Rules apply only to those members of FINRA that are also members of
the NYSE (``Dual Members''). The FINRA Rules apply to all FINRA
members, unless such rules have a more limited application by their
terms. For more information about the rulebook consolidation
process, see FINRA Information Notice, March 12, 2008 (Rulebook
Consolidation Process).
\5\ See supra note 3.
---------------------------------------------------------------------------
Margin Requirements--NASD Rules 2520, 2521, 2522, and IM-2522 and
Incorporated NYSE Rule 431
FINRA proposes to adopt the margin requirements set forth in NASD
Rules 2520 through 2522 and IM-2522 as FINRA Rule 4210, subject to
certain amendments, discussed below and to delete Incorporated NYSE
Rule 431 (Margin Requirements). The proposed amendments, among other
things, reflect certain requirements in Incorporated NYSE Rule 431.
NASD Rule 2520 (Margin Requirements) and Incorporated NYSE Rule
431, which are almost identical, prescribe requirements governing the
extension of credit by members that offer margin accounts to customers,
as generally permitted in accordance with Regulation T of the Board of
Governors of the Federal Reserve System (``Regulation T'').\6\ These
rules promulgate the margin requirements that determine the amount of
collateral customers are expected to maintain in their margin accounts,
including strategy-based margin accounts and portfolio margin accounts.
Maintenance margin requirements for equity, fixed income, warrants and
option securities also are established under these rules.
---------------------------------------------------------------------------
\6\ See Regulation T Section 220.4.
---------------------------------------------------------------------------
Rule Structure
FINRA proposes to combine NASD Rules 2520, 2521, 2522 and IM-2522
into the single consolidated margin rule, FINRA Rule 4210. In addition,
FINRA proposes to re-structure the rule to improve its organization and
make it easier to read. First, FINRA proposes to incorporate NASD Rule
2521 (Margin--Exemption for Certain Members) as FINRA Rule 4210(h),
which provides that any member for which another self-regulatory
organization acts as the designated examining authority is exempt from
FINRA Rule 4210. Second, FINRA proposes to incorporate NASD Rule 2522
(Definitions Related to Options, Currency Warrants, Currency Index
Warrants and Stock Index Warrant Transactions) as FINRA Rule
4210(f)(2)(A), which contains definitions regarding margining options,
currency warrants, currency index warrants and stock index warrant
transactions.\7\ In so doing, FINRA proposes to delete extraneous
definitions and retain only those definitions that are pertinent to the
new rule. Third, FINRA proposes to combine the margin provisions
regarding currency warrants, currency index warrants and stock index
warrants from NASD Rule 2520(f)(10) together with similar sections in
paragraph (f)(2) of FINRA Rule 4210. All margin provisions regarding
such warrants were combined in a single section in corresponding
Incorporated NYSE Rule 431(f)(2), and FINRA proposes to follow this
model. FINRA believes combining all provisions in a single section
regarding such warrants will make the rule easier to read. Finally,
FINRA proposes to incorporate NASD IM-2522 (Computation of Elapsed
Days) as Supplementary Material to FINRA Rule
[[Page 32521]]
4210, which provides illustrations on how to calculate the number of
elapsed days for accrued interest on Treasury bonds or notes.
---------------------------------------------------------------------------
\7\ In this regard, FINRA proposes to adopt the model of
Incorporated NYSE Rule 431 of consolidating relevant definitions
into FINRA Rule 4210.
---------------------------------------------------------------------------
Net Capital Calculations
FINRA proposes in several instances in FINRA Rule 4210 \8\ to
specify that the member should reference SEC Rule 15c3-1 and, if
applicable, FINRA Rule 4110 (Capital Compliance) when calculating net
capital, charges against net capital and haircut requirements. Members
that may be subject to greater net capital requirements pursuant to
FINRA Rule 4110 would need to ensure they are in compliance with both
the SEC and FINRA net capital provisions in calculating net capital and
its impact on margin calculations. In addition, consistent with the
corresponding Incorporated NYSE Rule 431 requirements, FINRA proposes
to provide in FINRA Rule 4210(e)(5)(A) and (B) (regarding specialists'
and market makers' accounts), (e)(6)(A) (regarding broker-dealer
accounts) and (e)(6)(B)(i)c. (regarding joint back office arrangements)
that when computing charges against net capital for transactions in
securities covered by FINRA Rule 4210(e)(2)(F) (regarding transactions
with exempt accounts involving certain ``good faith'' securities) and
FINRA Rule 4210(e)(2)(G) (regarding transactions with exempt accounts
involving highly rated foreign sovereign debt securities and investment
grade debt securities), absent a greater haircut requirement that may
have been imposed on such securities pursuant to FINRA Rule 4110(a),
the respective requirements of those paragraphs may be used, rather
than the haircut requirements of SEC Rule 15c3-1.
---------------------------------------------------------------------------
\8\ See, e.g., FINRA Rule 4210(e)(2)(D), (e)(2)(F), (e)(2)(G),
(e)(4), (e)(5) and (e)(6). Incorporated NYSE Rule 431 referenced
NYSE's net capital rules in these same sections, and FINRA proposes
to follow this model.
---------------------------------------------------------------------------
Joint Accounts Exemption
FINRA proposes to integrate Incorporated NYSE Rule 431
Supplementary Material .10 into FINRA Rule 4210(e)(3) regarding joint
accounts in which the carrying member or a partner or stockholder
therein has an interest. The provision permits a member to seek an
exemption under the FINRA Rule 9600 Series if the account is confined
exclusively to transactions and positions in exempted securities. The
proposed rule change would provide that any such application shall
include the complete description of the security; cost price, offering
price and principal amount of obligations which have been purchased or
may be required to be purchased; the date on which the security is to
be purchased or on which there will be a contingent commitment to
purchase the security; the approximate aggregate indebtedness; the
approximate net capital; and the approximate total market value of all
readily marketable securities (1) exempted and (2) non-exempted, held
in member accounts, partners' capital accounts, partners' individual
accounts covered by approved agreements providing for their inclusion
as partnership property, accounts covered by subordination agreements
approved by FINRA and customers' accounts in deficit.
Additional Requirements on Control and Restricted Securities and
Relationship to FINRA Rule 4120 (Regulatory Notification and Business
Curtailment)
FINRA proposes to adopt provisions from Incorporated NYSE Rule 431
pertaining to deductions from net capital on control and restricted
securities, which are not contained in NASD Rule 2520.\9\ These
provisions, which would be set forth in FINRA Rule 4210(e)(8)(C)(ii),
(iii) and (v), require that a member make deductions from its net
capital if it extends credit over specified thresholds, discussed
below, on control and restricted securities, and it must take such
deductions into account when determining if it has reached any of the
financial triggers specified in FINRA Rule 4120.\10\ The proposed rule
change also would make conforming amendments to FINRA Rule
4120(a)(1)(F) and (c)(1)(F) (Regulatory Notification and Business
Curtailment) to clarify that a member must take into account the
special deductions from net capital set forth in FINRA Rule
4210(e)(8)(C) in determining its status under FINRA Rule 4120. The
margin provision specifically provides that the greater of the
aggregate credit agreed to be extended in writing or the aggregate
credit that is actually extended to all customers on control and
restricted securities of any one issue that exceeds 10 percent of the
member's excess net capital shall be deducted from net capital for
purposes of determining a member's status under FINRA Rule 4120. The
amount of such aggregate credit extended, which has been deducted in
computing net capital under SEC Rule 15c3-1 and, if applicable, FINRA
Rule 4110(a), need not be included in this calculation. FINRA, upon
written application, may reduce the deduction to net capital under
FINRA Rule 4120 to 25 percent of such aggregate credit extended that
exceeds 10 percent but is less than 15 percent of the member's excess
net capital. In addition, the aggregate credit extended to all
customers on all control and restricted securities (reduced by the
amount of such aggregate credit which has been deducted in computing
net capital under SEC Rule 15c3-1 and, if applicable, FINRA Rule
4110(a)), shall be deducted from net capital on the following basis for
purposes of determining a member's status under FINRA Rule 4120. First,
to the extent such net amount of credit extended does not exceed 50
percent of a member's excess net capital, 25 percent of such net amount
of credit extended shall be deducted. Second, 100 percent of such net
amount of credit extended which exceeds 50 percent of a member's excess
net capital shall be deducted. The amount to be deducted from net
capital for purposes of determining a member's status under Rule 4120
shall not exceed 100 percent of the aggregate credit extended reduced
by any amount deducted in computing net capital under SEC Rule 15c3-1
and, if applicable, Rule 4110(a).
---------------------------------------------------------------------------
\9\ See Incorporated NYSE Rule 431(e)(8)(C)(ii), (iii) and (v).
\10\ FINRA Rule 4120 is based on Incorporated NYSE Rules 325 and
326, which were referenced in Incorporated NYSE Rule
431(e)(8)(C)(ii), (iii) and (v). FINRA Rule 4120 requires carrying
and clearing members to notify FINRA if any of the specified
financial triggers in FINRA Rule 4120 are reached. The rule also
addresses circumstances under which a member would be prohibited
from expanding its business or required to reduce its business.
---------------------------------------------------------------------------
Day Trading
FINRA proposes to adopt Supplementary Material .30 and .60 from
Incorporated NYSE Rule 431 regarding day trading in proposed FINRA Rule
4210(f)(8)(B). FINRA proposes to integrate Supplementary Material .60
from Incorporated NYSE Rule 431 in FINRA Rule 4210(f)(8)(B)(iii) to
provide that the day-trading buying power for non-equity securities may
be computed using the applicable special maintenance margin
requirements pursuant to other provisions of the margin rule. In
addition, FINRA proposes to adopt Supplementary Material .30 from
Incorporated NYSE Rule 431 as FINRA Rule 4210(f)(8)(B)(iv)b. to provide
that in the event that the member at which a customer seeks to open an
account or resume day trading in an existing account, knows or has a
reasonable basis to believe that the customer will engage in pattern
day trading, then the minimum equity required ($25,000) must be
deposited in the account prior to commencement of day trading. FINRA
also proposes to relocate
[[Page 32522]]
paragraph (f)(8)(C) of NASD Rule 2520 into FINRA Rule
4210(f)(8)(B)(iii) that specifies that day trading deficiencies must be
met within five business days of the trade date.
Portfolio Margining
FINRA proposes to amend FINRA Rule 4210(g)(5) to highlight to
members that portfolio margin-eligible participants, in addition to
being required to be approved to engage in uncovered short option
contracts pursuant to FINRA Rule 2360, must be approved to engage in
security futures transactions pursuant to FINRA Rule 2370.
Conforming Amendments
FINRA proposes to add the terms ``approved market maker,'' ``market
maker'' and ``market making'' to FINRA Rule 4210(f)(10)(F) to conform
to rule changes made by the NYSE.\11\ The NYSE changes were made in
connection with the operation of the NYSE's Market Model.\12\ As a
result of the implementation of these changes, the NYSE amended several
of its rules, including NYSE Rule 431(f)(10)(F), to add the terms
``approved market maker,'' ``market maker'' and ``market making'' to
reflect the current DMMs operating on the NYSE. FINRA also proposes
amending the definitions of the same terms used in FINRA Rule
4210(e)(5)(A) and (f)(10)(E) for consistency purposes.
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release No. 59077 (December 10,
2008), 73 FR 76691 (December 17, 2008) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change by New York Stock
Exchange LLC Amending Exchange Rule 104T to Make a Technical
Amendment to Delete Language Relating to Orders Received by NYSE
Systems and DMM Yielding; Clarifying the Duration of the Provisions
of Rule 104T; Making Technical Amendments to Rule 98 and Rule 123E
to Update Rule References for DMM Net Capital Requirements;
Rescinding Paragraph (g) of Rule 123; and Making Conforming Changes
to Certain Exchange Rules to Replace the Term ``Specialist'' with
``DMM''; File No. SR-NYSE-2008-127).
\12\ See Securities Exchange Act Release No. 58845 (October 24,
2008), 73 FR 64379 (October 29, 2008) (SEC Approval Order of SR-
NYSE-2008-46 approving certain rules to operate as a pilot scheduled
to end October 1, 2009); see also Securities Exchange Act Release
No. 60756 (October 1, 2009), 74 FR 51628 (October 7, 2009) (SR-NYSE-
2009-100); Securities Exchange Act Release No. 61031 (November 19,
2009), 74 FR 62368 (November 27, 2009); and Securities Exchange Act
Release No. 61724 (March 17, 2010), 75 FR 14221 (March 24, 2010)
(extending the operation of the pilot until the earlier of the SEC
approval to make permanent or September 30, 2010). As part of this
new model, the functions formerly carried out by specialists on the
NYSE were replaced by a new market participant, known as a
Designated Market Maker (``DMM'').
---------------------------------------------------------------------------
Clarifying and Technical Amendments
Finally, FINRA proposes to make several technical changes to the
margin rule text to update terminology and similar clarifications.
First, FINRA proposes to add definitions to FINRA Rule 4210(f)(2)(A)
regarding ``listed'' and ``OTC'' options and employ such terms
throughout FINRA Rule 4210(f)(2).\13\ FINRA is not proposing any
substantive changes to the margin requirements for listed or over-the-
counter options; rather, the proposed rule change would make the rule
easier to read by creating such definitions and using the terms
consistently throughout the rule text.
---------------------------------------------------------------------------
\13\ The term ``listed'' as used with reference to a call or put
option contract would mean an option contract that is traded on a
national securities exchange and issued and guaranteed by a
registered clearing agency. The term ``OTC'' as used with reference
to a call or put option contract would mean an over-the-counter
option contract that is not traded on a national securities exchange
and is issued and guaranteed by the carrying broker-dealer.
Accordingly, the proposed rule change would delete as unnecessary
certain descriptive references in NASD Rule 2520(f)(2) to listed and
OTC options.
---------------------------------------------------------------------------
Second, in proposed FINRA Rule 4210(f)(2)(I)(iv), FINRA proposes
several clarifications to terminology where no margin may be required
if the specified options or warrants are carried ``short'' in the
account of a customer, against an escrow agreement, and either are held
in the account at the time the options or warrants are written, or
received in the account promptly thereafter. The proposed rule change
would clarify that with respect to such options or warrants, an escrow
agreement is used, in a form satisfactory to FINRA, issued by a third
party custodian bank or trust company, and in compliance with the
requirements of Rule 610 of The Options Clearing Corporation. The
corresponding provisions in Incorporated NYSE Rule 431\14\ used the
terms ``letter of guarantee'' and ``escrow receipt'' while NASD Rule
2520 used the term ``letter of guarantee.'' While in this context such
terms generally were used interchangeably, FINRA proposes to use the
term ``escrow agreement'' to eliminate any potential confusion.\15\ The
proposed rule change also would replace the term ``guarantor'' with the
term ``custodian'' to more accurately reflect the third party's role.
In addition, the proposed rule change would revise the definition of
what constitutes a qualified security by eliminating the reference to
the list of Over-the-Counter Margin Stocks published by the Board of
Governors of the Federal Reserve System as the Federal Reserve no
longer publishes such a list.
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\14\ See Incorporated NYSE Rule 431(f)(2)(H)(iv).
\15\ Such approach also is consistent with the CBOE rules. See
CBOE Rule 12.3(d).
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Third, the proposed rule change would insert the term ``aggregate''
before exercise price throughout proposed FINRA Rule 4210(f)(2)(H) and
(f)(2)(N) to clarify a calculation must be made in the strategies and
spreads that are noted (i.e., offsets, reverse conversions, butterfly
spread, etc.). Finally, the proposed rule change would make various
non-substantive changes to reflect the formatting, presentation and
style conventions used in the Consolidated FINRA Rulebook.
Daily Record of Margin Requirements--Incorporated NYSE Rule 432(a)
FINRA proposes to adopt Incorporated NYSE Rule 432(a) (Daily Record
of Required Margin) as FINRA Rule 4220 in substantially the form it
exists today. Incorporated NYSE Rule 432(a) sets forth the requirements
for daily recordkeeping of initial and maintenance margin calls that
are issued pursuant to Regulation T and the margin rules. There is no
corresponding NASD rule. FINRA believes that this is an important
requirement to heighten FINRA's ability to monitor members' margin call
practices. In addition, Incorporated NYSE Rule 432(b) prohibits a
member from allowing a customer to make a practice of satisfying
initial margin calls by the liquidation of securities. However, this
provision is substantially similar to the provision in proposed FINRA
Rule 4210(f)(7), except that the proposed FINRA rule provision does not
contain the exception for omnibus accounts. Accordingly, FINRA proposes
to eliminate Incorporated NYSE Rule 432(b) and modify paragraph (f)(7)
of FINRA Rule 4210 to add that the prohibition on liquidations shall
not apply to any account carried on an omnibus basis as prescribed by
Regulation T.
Required Submissions of Requests for Extension of Time Under Regulation
T and SEC Rule 15c3-3--NASD Rule 3160 and Incorporated NYSE Rule 434
FINRA proposes to adopt NASD Rule 3160 (Extensions of Time Under
Regulation T and SEC Rule 15c3-3) as FINRA Rule 4230 with one
modification discussed below and delete the substantively similar
Incorporated NYSE Rule 434 (Required Submission of Requests for
Extensions of Time for Customers). NASD Rule 3160 and Incorporated NYSE
Rule 434 set forth requirements governing members' requests for
extensions of time, as permitted in accordance with Regulation T and
SEC Rule 15c3-3(n). These rules provide that when FINRA is the
designated examining authority for a member, requests for extensions of
time must be submitted to FINRA for approval, in a format FINRA
requires. In addition, NASD Rule 3160 requires each
[[Page 32523]]
clearing member that submits extensions of time on behalf of broker-
dealers for which it clears to submit a monthly report to FINRA that
indicates overall ratios of requested extensions of time to total
transactions that have exceeded a percentage specified by FINRA.\16\
FINRA monitors the number of Regulation T and SEC Rule 15c3-3 extension
requests for each firm to determine whether to impose prohibitions on
further extensions of time.\17\
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\16\ See Notice to Members 06-62 (November 2006). FINRA would
retain the reporting threshold specified in Notice to Members 06-62
of requiring a report for all introducing or correspondent firms
that have overall ratios of requests for extensions of time to total
transactions for the month that exceed 2%. In the event FINRA
adjusts the reporting threshold, or the limitation threshold stated
in note 16 below, it would advise members of the new parameters in a
Regulatory Notice.
\17\ See supra note 15. FINRA will continue to prohibit further
extension of time requests for (1) introducing or correspondent
firms that exceed a 3% ratio of the number of extension of time
requests to total transactions for the month and (2) clearing firms
that exceed a 1% ratio of extension of time requests to total
transactions.
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FINRA proposes to add a provision to proposed FINRA Rule 4230 to
clarify that for the months when no broker-dealer for which a clearing
member clears exceeds the extension of time ratio criteria (i.e., 2%),
the clearing member must submit a report indicating such. FINRA had
previously requested such submissions but believes the submissions are
essential to ensure FINRA has a complete and accurate understanding of
correspondent firm extension requests.
As noted above, FINRA will announce the implementation date of the
proposed rule change in a Regulatory Notice to be published no later
than 90 days following Commission approval. The implementation date
will be no later than 180 days following Commission approval.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\18\ 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 will
clarify and streamline the margin requirements applicable to its
members, as well as those rules addressing extension of time requests
under Regulation T and SEC Rule 15c3-3.
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\18\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
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 Number SR-FINRA-2010-024 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-FINRA-2010-024. 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 Web site
viewing and printing 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-2010-024
and should be submitted on or before June 29, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-13662 Filed 6-7-10; 8:45 am]
BILLING CODE 8010-01-P