[Federal Register: January 26, 2009 (Volume 74, Number 15)]
[Proposed Rules]
[Page 4357-4363]
[DOCID:fr26ja09-10]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Chapter II

[Release Nos. 33-9000, 34-59248, 39-2460, IC-28600, IA-2830; File No.
S7-03-09]

List of Rules To Be Reviewed Pursuant to the Regulatory
Flexibility Act

AGENCY: Securities and Exchange Commission.

ACTION: Publication of list of rules scheduled for review.

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SUMMARY: The Securities and Exchange Commission is today publishing a
list of rules to be reviewed pursuant to Section 610 of the Regulatory
Flexibility Act. The list is published to provide the public with
notice that these rules are scheduled for review by the agency and to
invite public comment on them.

DATES: Comments should be submitted by February 25, 2009.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/other.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number S7-03-09 on the subject line; or
     Use the Federal eRulemaking Portal (http://
www.regulations.gov). Follow the instructions for submitting comments.

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. S7-03-09. This file number
should be included on the subject line if e-mail is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
Internet Web site (http://www.sec.gov/rules/other.shtml). Comments also
are available for public 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. All
comments received will be posted without change; we do not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Anne Sullivan, Office of the General
Counsel,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: The Regulatory Flexibility Act (``RFA''),
codified at 5 U.S.C. 600-611, requires an agency to review its rules
that have a significant economic impact upon a substantial number of
small entities within ten years of the publication of such rules as
final rules. 5 U.S.C. 610(a). The purpose of the review is ``to
determine whether such rules should be continued without change, or
should be amended or rescinded * * * to minimize any significant
economic impact of the rules upon a substantial number of such small
entities.'' 5 U.S.C. 610(a).
    The RFA sets forth specific considerations that must be addressed
in the review of each rule:
     The continued need for the rule;
     The nature of complaints or comments received concerning
the rule from the public;
     The complexity of the rule;
     The extent to which the rule overlaps, duplicates or
conflicts with other federal rules, and, to the extent feasible, with
state and local governmental rules; and
     The length of time since the rule has been evaluated or
the degree to which technology, economic conditions, or other factors
have changed in the area affected by the rule. (5 U.S.C. 610(c)).
    The Securities and Exchange Commission, as a matter of policy,
reviews all final rules that it published for notice and comment to
assess not only their continued compliance with the RFA, but also to
assess generally their continued utility.\1\ The list below is
therefore broader than that required by the RFA, and may include rules
that do not have a substantial impact on a significant number of small
entities. Where the Commission has previously made a determination of a
rule's impact on small businesses, the determination is noted on the
list. The Commission particularly solicits public comment on whether
the rules listed below affect small businesses in new or different ways
than when they were first adopted.
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    \1\ When the Commission implemented the Act in 1980, it stated
that it ``intend[ed] to conduct a broader review [than that required
by the RFA], with a view to identifying those rules in need of
modification or even rescission.'' Securities Act Release No. 6302
(Mar. 20, 1981), 46 FR 19251 (Mar. 30, 1981).
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    The rules and forms listed below are scheduled for review by staff
of the Commission during the next twelve months. The list includes
rules from 1998, 1997, 1996 and 1995. The rules are grouped according
to which Division or Office of the Commission recommended their
adoption.

Division of Corporation Finance

    Title: Plain English Disclosure.
    Citation: 17 CFR 230.421, 17 CFR 230.481.
    Authority: 15 U.S.C. 77a et seq.
    Description: This rule requires that issuers write the cover page,
summary and risk factors sections of prospectuses in plain English.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 33-7497,
which was approved by the Commission on January 28, 1998, which amended
Rules 421 and 481. Comments to the proposing release and Initial
Regulatory Flexibility Analysis were considered at that time.
* * * * *
    Title: Regulation S.
    Citation: 17 CFR 230.900-905.
    Authority: 15 U.S.C. 77a et seq.
    Description: This rule provides a safe harbor from the term
``offer'' for certain offshore communications made by a registrant.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in

accordance with 5 U.S.C. 604 in conjunction with the adoption of
Release No. 33-7470, which was approved by the Commission on October
10, 1997. Rule 902 was originally adopted as part of Regulation S in
Release No. 33-6863, containing a Final Regulatory Flexibility Analysis
which was approved by the Commission on April 24, 1990. Comments to the
proposing releases and Initial Regulatory Flexibility Analyses were
considered at those times.
* * * * *
    Title: Rule 135e: Offshore press conferences, meetings with issuer
representatives conducted offshore, and press-related material released
offshore.
    Citation: 17 CFR 230.135e.
    Authority: 15 U.S.C. 77a et seq.
    Description: This rule provides a safe harbor from the term
``offer'' for certain offshore communications made by a registrant.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 33-7470,
which was approved by the Commission on October 10, 1997. Comments to
the proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Rule 12a-8: Exemption of depositary shares
Rule 15d-3: Reports for depositary shares registered on Form F-6.
    Citation: 17 CFR 240.12a-8, 17 CFR 240.15d-3
    Authority: 15 U.S.C. 78a et seq.
    Description: These rules are designed to provide exemptions for
depositary shares from section 12(a) of the Securities Act and from
certain reporting requirements.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 33-7431,
which was approved by the Commission on July 18, 1997. Comments to the
proposing release and Initial Flexibility Analysis were considered at
that time.
* * * * *
    Title: Item 305 of Regulation S-K.
    Citation: 17 CFR 229.305.
    Authority: 15 U.S.C. 77a et seq.
    Description: This rule requires quantitative and qualitative
disclosures about market risk.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 33-7386,
which was approved by the Commission on January 31, 1997. Comments to
the proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Delivery of Prospectus.
    Citation: 17 CFR 240.15c2-8.
    Authority: 15 U.S.C. 78a et seq.
    Description: This rule establishes the requirements for brokers and
dealers to deliver a prospectus to purchasers of securities.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 33-7168,
which was approved by the Commission on May 11, 1995. Comments to the
proposing release and Initial Flexibility Analysis were considered at
that time.
* * * * *
    Title: Exemption for Certain California Limited Issues.
    Citation: 17 CFR 230.1001.
    Authority: 15 U.S.C. 77a et seq.
    Description: The rule exempts from the registration requirements of
the Securities Act offers and sales up to $5 million that are exempt
from state qualification under paragraph (n) of Section 25102 of the
California Corporations Code. The purpose of the rule is to assist
small businesses' capital raising ability by creating a federal
exemption for offering of up to $5 million that meet the qualifications
of a California exemption.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 33-7285,
which was approved by the Commission on May 1, 1996. Comments to the
proposing release and Initial Flexibility Analysis were considered at
that time.
* * * * *
    Title: Settlement Cycle.
    Citation: 17 CFR 240.15c6-1.
    Authority: 15 U.S.C. 77a et seq.
    Description: This rule imposes a time requirement for brokers and
dealers to complete the settlement of a securities transaction.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 33-7168,
which was approved by the Commission on May 11, 1995. Comments to the
proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.

Division of Investment Management

    Title: Rule 203A-1.
    Citation: 17 CFR 275.203A-1.
    Authority: 15 U.S.C. 80b-3a(a)(1)(A), 15 U.S.C. 80b-3a(c), 15
U.S.C. 80b-11(a).
    Description: The Commission adopted rule 203A-1 to implement the
Investment Advisers Supervision Coordination Act, which, among other
things, reallocated the responsibilities for regulating investment
advisers between the Commission and the state securities regulatory
authorities. The rule increases the threshold for state registered
advisers to switch to Commission registration to $30 million in assets
under management and requires that advisers to registered investment
companies be registered with the Commission. The rule also provides
state registered advisers with assets under management between $25
million and $30 million an option to remain registered with the states
or to switch to Commission registration. In addition, the rule contains
provisions prescribing procedures for switching registration from
states to the Commission or vice versa.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. IA-1633,
which was approved by the Commission on May 15, 1997. Comments to the
proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Rule 203A-2.
    Citation: 17 CFR 275.203A-2.
    Authority: 15 U.S.C. 80b-3a(c).
    Description: The Commission adopted rule 203A-2 to implement the
Investment Advisers Supervision Coordination Act, which, among other
things, reallocates the responsibilities for regulating investment
advisers between the Commission and the state securities regulatory
authorities. The rule exempts certain types of investment advisers from
the prohibition on Commission registration. As a result, the following
investment advisers are not prohibited from registering with the
Commission: Nationally recognized statistical rating organizations,
pension consultants, investment advisers controlling, controlled by, or
under common control with an investment adviser registered with the
Commission, investment advisers expecting to be eligible for Commission
registration within 120 days, multi-state investment

advisers, and Internet investment advisers.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. IA-1633,
which was approved by the Commission on May 15, 1997. Comments to the
proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Rule 203A-3.
    Citation: 17 CFR 275.203A-3.
    Authority: 15 U.S.C. 80b-2a(17), 15 U.S.C. 80b-11(a).
    Description: The Commission adopted rule 203A-3 to implement the
Investment Advisers Supervision Coordination Act, which, among other
things, reallocates the responsibilities for regulating investment
advisers between the Commission and the state securities regulatory
authorities. The rule defines certain terms for purposes of section
203A of the Investment Advisers Act (15 U.S.C. 80b-3a) and the rules
thereunder. The terms defined in this rule include: ``investment
adviser representative,'' ``excepted person,'' ``impersonal investment
advice,'' ``place of business,'' and ``principal office and place of
business.''
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. IA-1633,
which was approved by the Commission on May 15, 1997. Comments to the
proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Rule 203A-4.
    Citation: 17 CFR 275.203A-4.
    Authority: 15 U.S.C. 80b-11(a).
    Description: The Commission adopted rule 203A-4 to implement the
Investment Advisers Supervision Coordination Act, which, among other
things, reallocates the responsibilities for regulating investment
advisers between the Commission and the state securities regulatory
authorities. The rule states that the Commission shall not assert a
violation of section 203 of the Investment Advisers Act of 1940 (15
U.S.C. 80b-3) by a state registered adviser for failure to register
with the Commission if the adviser reasonably believes that it does not
have assets under management of at least $30 million and is therefore
not required to register with the Commission.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. IA-1633,
which was approved by the Commission on May 15, 1997. Comments to the
proposing release and Initial Flexibility Analysis were considered at
that time.
* * * * *
    Title: Rule 2a51-1.
    Citation: 17 CFR 270.2a51-1.
    Authority: 15 U.S.C. 80a-1 et seq., 80a-2(a)(51)(B), 80a-6(c), 80a-
37(a).
    Description: Rule 2a51-1 under the Investment Company Act of 1940
(``Act'') defines the term ``investment'' for purposes of section
2(a)(51) of the Act, and section 3(c)(7) of the Act, which excludes
from regulation under the Act privately offered companies that sell
their securities to ``qualified purchasers'' owning or investing on a
discretionary basis a specified amount of ``investments.''
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. IC-22597,
which was approved by the Commission on April 3, 1997. Comments to the
proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Rule 2a51-2.
    Citation: 17 CFR 270.2a51-2.
    Authority: 15 U.S.C. 80a-1 et seq., 80a-2(a)(51)(B), 80a-6(c), 80a-
37(a).
    Description: Rule 2a51-2 under the Investment Company Act of 1940
(``Act'') defines the term ``beneficial owner'' for purposes of section
2(a)(51) of the Act and section 3(c)(7)(B) of the Act, which permitted
unregulated private companies that, on or before September 1, 1996,
relied on section 3(c)(1) of the Act (which excludes from regulation
under the Act privately offered companies with 100 or fewer
``beneficial owners'') to convert to unregulated private companies in
reliance on section 3(c)(7) of the Act (which excludes from regulation
under the Act privately offered companies that sell their securities to
``qualified purchasers'' owning or investing on a discretionary basis a
specified amount of ``investments''). Section 3(c)(7) of the Act was
enacted in 1996.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. IC-22597,
which was approved by the Commission on April 3, 1997. Comments to the
proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Rule 2a51-3.
    Citation: 17 CFR 270.2a51-3.
    Authority: 15 U.S.C. 80a-1 et seq., 80a-2(a)(51)(B), 80a-6(c), 80a-
37(a).
    Description: Rule 2a51-3 under the Investment Company Act of 1940
(``Act'') provides that a company cannot be a ``qualified purchaser''
for purposes of section 3(c)(7) of the Act (which excludes from
regulation under the Act privately offered companies that sell their
securities to ``qualified purchasers'' owning or investing on a
discretionary basis a specified amount of ``investments'' (``private
fund'')) if it was formed for the specific purpose of acquiring the
securities offered by a private fund unless each beneficial owner of
the company's securities is a qualified purchaser.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. IC-22597,
which was approved by the Commission on April 3, 1997. Comments to the
proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Rule 3c-1.
    Citation: 17 CFR 270.3c-1.
    Authority: 15 U.S.C. 80a-1 et seq., 80a-6(c), 80a-37(a)
    Description: Rule 3c-1 under the Investment Company Act of 1940
(``Act'') defines the term ``beneficial owner'' for purposes of section
3(c)(1) of the Act, which excludes from regulation under the Act
privately offered companies with 100 or fewer ``beneficial owners.''
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. IC-22597,
which was approved by the Commission on April 3, 1997. Comments to the
proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Rule 3c-5.
    Citation: 17 CFR 270.3c-5.
    Authority: 15 U.S.C. 80a-1 et seq., 80a-6(c), 80a-37(a).
    Description: Rule 3c-5 under the Investment Company Act of 1940
(``Act'') permits ``knowledgeable employees'' of a privately offered
company (or knowledgeable employees of the company's affiliates) to
invest in the company without causing the

company to lose its exclusion from regulation under section 3(c)(1) or
section 3(c)(7) of the Act. Section 3(c)(1) of the Act excludes from
regulation under the Act privately offered companies with 100 or fewer
``beneficial owners.'' Section 3(c)(7) of the Act excludes from
regulation under the Act privately offered companies that sell their
securities to ``qualified purchasers'' owning or investing on a
discretionary basis a specified amount of ``investments.''
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. IC-22597,
which was approved by the Commission on April 3, 1997. Comments to the
proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Rule 3c-6.
    Citation: 17 CFR 270.3c-6.
    Authority: 15 U.S.C. 80a-1 et seq., 80a-3(c)(1), 80a-3(c)(7), 80a-
6(c), 80a-37(a).
    Description: Rule 3c-6 under the Investment Company Act of 1940
(``Act'') treats persons who acquire securities of a privately offered
company that is excluded from regulation under the Act in reliance on
section 3(c)(7) of the Act as qualified purchasers for purposes of
those securities if the acquisition is in accordance with the rule.
Section 3(c)(7) of the Act excludes from regulation under the Act
privately offered companies that sell their securities to ``qualified
purchasers'' owning or investing on a discretionary basis a specified
amount of ``investments.''
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. IC-22597,
which was approved by the Commission on April 3, 1997. Comments to the
proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Rule 3a-4.
    Citation: 17 CFR 270.3a-4.
    Authority: 15 U.S.C. 80a-1 et seq., 80a-6(c), 80a-37(a).
    Description: Rule 3a-4 under the Investment Company Act of 1940
(``Act'') provides a nonexclusive safe harbor from the definition of
investment company for certain investment advisory programs. Under the
rule, an investment program organized and operated in accordance with
the rule's provisions is deemed not to be an investment company within
the meaning of the Act.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. IC-22579,
which was approved by the Commission on March 24, 1997. Comments to the
proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Rule 17f-6.
    Citation: 17 CFR 270.17f-6.
    Authority: 15 U.S.C. 80a-1 et seq., 80a-6(c), 80a-37(a).
    Description: Rule 17f-6 under the Investment Company Act of 1940
permits registered investment companies to maintain their assets with
futures commission merchants and certain other entities in connection
with futures contracts and commodity options traded on U.S. and foreign
exchanges.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. IC-22389,
which was approved by the Commission on December 11, 1996. Comments to
the proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Rule 17a-9.
    Citation: 17 CFR 270.17a-9.
    Authority: 15 U.S.C. 80a-1 et seq., 80a-6(c), 80a-37(a).
    Description: Rule 17a-9 under the Investment Company Act of 1940
(the ``Act'') specifies conditions under which, notwithstanding section
17(a) of the Act, a money market fund affiliate may purchase from the
money market fund securities that are no longer ``eligible securities''
for purposes of rule 2a-7.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. IC-21837,
which was approved by the Commission on March 21, 1996. Comments to the
proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Form 24F-2.
    Citation: 17 CFR 274.24.
    Authority: 15 U.S.C. 60a-1 et seq.
    Description: Rule 24f-2 requires every open-end management
investment company, face amount certificate company, or unit investment
trust that is deemed to have registered an indefinite amount of
securities pursuant to Section 24(f) of the Investment Company Act to
file form 24F-2, Annual Notice of Securities Sold Pursuant to Rule 24f-
2.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 33-7208,
which the Commission approved on September 1, 1995. Comments to the
proposing release and Initial Flexibility Analysis were considered at
that time.
* * * * *
    Title: Rule 18f-3.
    Citation: 17 CFR 270.18f-3.
    Authority: 15 U.S.C. 80a-1 et seq., 80a-37, 80a-39.
    Description: Rule 18f-3 under the Investment Company Act of 1940
(``Act'') specifies conditions under which, notwithstanding sections
18(f)(1) and 18(i) of the Act, a registered open-end management
investment company or series or class thereof established in accordance
with section 18(f)(2) of the Act whose shares are registered on Form N-
1A may issue more than one class of voting stock.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 33-7143,
which was approved by the Commission on February 23, 1995. Comments to
the proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Rule 6c-10.
    Citation: 17 CFR 270.6c-10.
    Authority: 15 U.S.C. 80a-1 et seq., 80a-37, 80a-39.
    Description: Rule 6c-10 under the Investment Company Act of 1940
(``Act'') specifies conditions under which, notwithstanding sections
2(a)(32), 2(a)(35), and 22(d) of the Act, a registered open-end
management investment company or series or class thereof may permit a
contingent deferred sales load to be imposed on shares issued by the
company.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. IC-20916,
which was approved by the Commission on February 23, 1995. Comments to
the

proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.

Division of Trading and Markets

    Title: Regulation of Exchanges and Alternative Trading Systems.
    Citation: 17 CFR Parts 202, 240, 242 and 249.
    Authority: 15 U.S.C. 78 et seq., particularly Sections 78c(b), 78e,
78f, 78k-1, 78o, 78q(a), 78q(b), 78s, 78w(a), and 78mm.
    Description: The Commission adopted new rules and rule amendments
to allow alternative trading systems to choose whether to register as
national securities exchanges, or to register as broker-dealers and
comply with additional requirements under Regulation ATS, depending on
their activities and trading volume. The Commission also adopted
amendments to rules regarding registration as a national securities
exchange, repealing rule 17a-23, and amending the books and records
rules by transferring the recordkeeping requirements from rule 17a-23
to rules 17a-3 and 17a-4 as they apply to broker-dealer internal
trading systems. Finally, the Commission excluded from the rule filing
requirements for self-regulatory organizations certain pilot trading
systems operated by national securities exchanges and national
securities associations. These rules integrated the growing number of
alternative trading systems into the national market system,
accommodated the registration of proprietary alternative trading
systems as exchanges, and provided an opportunity for registered
exchanges to better compete with alternative trading systems.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 34-40760,
which was approved by the Commission on December 11, 1998. Comments to
the proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Amendment to Rule Filing Requirements for Self-Regulatory
Organizations Regarding New Derivative Securities Products.
    Citation: 17 CFR 240.19b-4(e).
    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 77ggg,
77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78j-1, 78k, 78k-1, 78l,
78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 78mm, 79q, 79t,
80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 80b-11.
    Description: The Commission amended rule 19b-4 under the Securities
Exchange Act of 1934 to permit self-regulatory organizations to list
and trade new derivative securities products pursuant to existing self-
regulatory organization trading rules, procedures, surveillance
programs and listing standards without submitting a proposed rule
change pursuant to Section 19(b).
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 34-40761,
which was approved by the Commission on December 8, 1998. The
Commission received no comments on the Initial Regulatory Flexibility
Analysis.
* * * * *
    Title: OTC Derivatives Dealers.
    Citation: 17 CFR 200.30-3, 240.3b-12, 240.3b-13, 240.3b-14, 240.3b-
15, 240.8c-1, 240.11a1-6, 240.15a-1, 240.15b1-1, 240.15c2-1, 240.15b9-
2, 240.15c2-5, 240.15c3-1, 240.15c3-2, 240.15c3-3, 240.15c3-4, 240.17a-
3, 240.17a-4, 240.17a-5, 240.17a-11, 240.17a-12, 240.36a1-1, 240.36a1-
2, and 249.617.
    Authority: 15 U.S.C. 78a et seq. (3(b), 11(a), 15(a), 15(b), 15(c),
17(a), 23, and 36) (15 U.S.C. 78c(b), 78k(a), 78o(a), 78o(b), 78o(c),
78q(a), 78w, and 78mm).
    Description: The Commission adopted new rules and rule amendments
to tailor capital, margin, and other broker-dealer regulatory
requirements to a class of registered dealers, called OTC derivatives
dealers, that are active in over-the-counter derivatives markets.
Registration as an OTC derivatives dealer under these rules is optional
and is an alternative to registration as a broker-dealer under the
traditional broker-dealer regulatory structure. It is available only to
entities that engage in dealer activities in eligible over-the-counter
derivative instruments and that meet certain financial responsibility
and other requirements.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 34-40594,
which was approved by the Commission on October 23, 1998. The
Commission received no comments on the Initial Regulatory Flexibility
Analysis.
* * * * *
    Title: Lost Securityholders.
    Citation: 17 CFR 240.17Ad-17, 240.17Ad-7, and 249b.102.
    Authority: 15 U.S.C. 77a et seq., 15 U.S.C. 78a et seq., 15 U.S.C.
79a et seq., 15 U.S.C. 80a et seq.
    Description: The Commission adopted rules 17Ad-17 and 17a-24 \2\
under the Securities Exchange Act of 1934, and amended form TA-2 and
rule 17Ad-7 under the Securities Exchange Act. Rule 17Ad-17 (designed
to reduce the number of ``lost securityholders'') requires transfer
agents to conduct searches in an effort to locate lost securityholders.
The amendment to rule 17Ad-7 set forth the retention time period for
the records relating to compliance with rule 17Ad-17, and the
amendments to form TA-2 provide the means for transfer agents to report
required information to the Commission.
---------------------------------------------------------------------------

    \2\ The Commission rescinded rule 17a-24 in a revised transfer
agent rule, Release No. 34-42892 (July 9, 2000).
---------------------------------------------------------------------------

    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 34-39176,
which was approved by the Commission on October 1, 1997. Comments to
the proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Net Capital Rule.
    Citation: 17 CFR 240.15c3-1.
    Authority: 15 U.S.C. 77a et seq., 15 U.S.C. 78a et seq., 15 U.S.C.
79a et seq., 15 U.S.C. 80a et seq.
    Description: The Commission amended rule 15c3-1 (``Net Capital
Rule'') under the Securities Exchange Act of 1934 to permit broker-
dealers to employ theoretical option pricing models in determining net
capital requirements for listed options and related positions.
Alternatively, the rule permits broker-dealers to elect a strategy-
based methodology. The amendments simplified the Net Capital Rule's
treatment of options for capital purposes and were designed to more
accurately reflect the risk inherent in broker-dealer options
positions.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 34-38248,
which was approved by the Commission on February 6, 1997. The
Commission received no comments on the Initial Regulatory Flexibility
Analysis.
* * * * *

    Title: Reporting Requirements for Brokers or Dealers under the
Securities Exchange Act of 1934.
    Citation: 17 CFR 240.17a-4.
    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg, 77nnn,
77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78k, 78k-1, 78l, 78m, 78n, 78o,
78p, 78q, 78s, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23, 80a-29,
80a-37, 80b-3, 80b-4 and 80b-11.
    Description: The Commission amended the broker-dealer record
preservation rule to allow broker-dealers to employ, under certain
conditions, electronic storage media to maintain records required to be
retained. The Commission also issued an interpretation of its record
preservation rule relating to the treatment of electronically generated
communications.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 34-38245,
which was approved by the Commission on January 31, 1997. The
Commission received no comments on the Initial Regulatory Flexibility
Analysis.
* * * * *
    Title: Anti-Manipulation Rules Concerning Securities Offerings.
    Citation: 17 CFR 228.502, 228.508, 229.502, 229.508, 230.418,
230.461, 240.10b-18, 240.11a-1, 240.13e-4, 240.13e-102, 240.14d-102,
240.17a-2, and 17 CFR Part 242.
    Authority: 15 U.S.C. 77a et seq., 15 U.S.C. 78a et seq., 15 U.S.C.
79a et seq., 15 U.S.C. 80a et seq.
    Description: The Commission adopted new Regulation M governing the
activities of underwriters, issuers, selling security holders, and
others in connection with offerings of securities. Regulation M was
intended to preclude manipulative conduct by persons with an interest
in the outcome of an offering. Regulation M significantly eased
regulatory burdens on offering participants by eliminating the trading
restrictions for underwriters of actively-traded securities; reducing
the scope of coverage for other securities; reducing restrictions on
issuer plans; providing a more flexible framework for stabilizing
transactions; and deregulating rights offerings. Consisting of five new
rules, plus a new definitional rule, Regulation M replaced rules 10b-6,
10b-6A, 10b-7, 10b-8, and 10b-21 (``trading practices rules'') under
the Securities Exchange Act of 1934 (``Exchange Act''), which were
rescinded. In addition, related amendments were made to Items 502(d)
and 508 of Regulations S-B and S-K, and to rules 10b-18 and 17a-2 under
the Exchange Act. Conforming changes to various rules under the
Securities Act of 1933 and the Exchange Act were made to reflect the
repeal of the trading practices rules and the adoption of Regulation M.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 34-38067,
which the Commission approved on December 20, 1996. Comments to the
proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Odd-Lot Tender Offers by Issuer.
    Citation: 17 CFR 240.13e-4.
    Authority: 15 U.S.C. 77a et seq., 15 U.S.C. 78a et seq., 15 U.S.C.
79a et seq., 15 U.S.C. 80a et seq.
    Description: The Commission adopted an amendment to rule 13e-4
under the Securities Exchange Act of 1934 (``Exchange Act''). The
amendment removed the rule's requirement that an issuer cash tender
offer made to odd-lot holders specify a record date of ownership for
eligibility to tender into the offer. The amendment enabled issuers to
conduct continuous, periodic, or extended odd-lot offers for their
equity securities. The Commission also granted a class exemption from
rule 10b-13,\3\ and a temporary class exemption from rule 10b-6,\4\
under the Exchange Act to permit issuers to conduct odd-lot offers, to
``round-up'' odd-lots on behalf of odd-lot holders, and to make
purchases of their securities otherwise than pursuant to the odd-lot
offer.
---------------------------------------------------------------------------

    \3\ The Commission replaced rule 10b-13 with new rule 14e-5 in
adopting regulations on cross-border tender offers, Release No. 33-
7760, 64 FR 61408 (Nov. 14, 1999).
    \4\ The Commission withdrew and replaced rule 10b-6 in adopting
Regulation M, infra.
---------------------------------------------------------------------------

    Prior Commission Determination Under 5 U.S.C. 601: The Chairman of
the Commission certified in connection with the Proposing Release that
the proposed amendment to Rule 13e-4 and the proposed class exemptions
from Rules 10b-6 and 10b-13, if adopted, would not have a significant
impact on a substantial number of small entities. The Commission
received no comments on this certification.
* * * * *
    Title: Order Execution Obligations (Rules 11Ac1-4 and 11Ac1-1).\5\
---------------------------------------------------------------------------

    \5\ The Commission renumbered rules 11Ac1-1 and 11Ac1-4 in
adopting Regulation NMS, Release No. 34-51808, 70 FR 37496 ( June
29, 2005). They are now at 17 CFR 242.602 and 242.604, respectively.
---------------------------------------------------------------------------

    Citation: 17 CFR 240.11Aa3-1, 240.11Ac1-1 and 240.11Ac1-4 (renamed
17 CFR 242.601(a), 242.602(a)(1) and 242.604).
    Authority: 15 U.S.C. 77a et seq., 15 U.S.C. 78a et seq., 15 U.S.C.
79a et seq., 15 U.S.C. 80a et seq.
    Description: The Commission adopted new rule 11Ac1-4 (``Display
Rule'') under the Securities Exchange Act of 1934 (``Exchange Act'') to
require the display of customer limit orders priced better than a
specialist's or over-the-counter market maker's quote or that add to
the size associated with such quote. The Commission also adopted
amendments to rule 11Ac1-1 (``Quote Rule'') under the Exchange Act to
require a market maker to publish quotations for any listed security
when it is responsible for more than 1% of the aggregate trading volume
for that security and to make publicly available any superior prices
that a market maker privately quotes through certain electronic
communications networks. These rules were designed to address growing
concerns about the handling of customer orders for securities. Finally,
the Commission deferred action on proposed rule 11Ac1-5. The substance
of this regulation remains largely intact in rules 602 and 604 of
Regulation NMS. See Release No. 34-51808, 69 FR 37496 (June 29, 2005).
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 34-37619A,
which was approved by the Commission on September 6, 1996. Comments to
the proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.
* * * * *
    Title: Unlisted Trading Privileges.
    Citation: 17 CFR 240.12f-1, 17 CFR 240.12f-2, 17 CFR 240.12f-3, 17
CFR 240.12f-5, 17 CFR 240.12f-6.
    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg, 77nnn,
77sss, 77ttt, 78a, 78c, 78d, 78i, 78j, 78l, 78m, 78n, 78o, 78p, 78q,
78s, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-
3, 80b-4 and 80b-11.
    Description: The Commission adopted new rules and rule amendments
to reduce the period that exchanges must wait before extending Unlisted
Trading Privileges (``UTP'') to any listed initial public offering,
from the third trading day in the security to the second trading day in
the security. The rules also require exchanges to have rules and

oversight mechanisms in place to ensure fair and orderly markets and
the protection of investors with respect to UTP in any security.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 34-35637,
which was approved by the Commission on April 21, 1995. Comments to the
proposing release and Initial Regulatory Flexibility Analysis were
considered at that time.

Office of General Counsel

    Title: Rules of Practice.
    Citation: 17 CFR Parts 200 and 201.
    Authority: 5 U.S.C. 551, 554, 556, and 557.
    Description: The Commission comprehensively revisited its Rules of
Practice (``Rules''), the procedural rules that govern Commission
administrative proceedings. The proceedings include enforcement
proceedings initiated by the Commission and review of disciplinary
proceedings brought by self-regulatory organizations. They also cover
administrative temporary cease-and-desist and disgorgement orders. The
Rules implemented revised procedures for the conduct of hearings,
including simplified service of orders instituting proceeding, expanded
use of prehearing conferences, codification of policies on the
availability of certain investigation files to respondents in
enforcement and disciplinary proceedings, issuance of subpoenas
returnable prior to hearing and the consideration by administrative law
judges of dispositive motions prior to hearing.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 34-35833,
which was approved by the Commission on June 9, 1995. The Commission
received no comments on the Initial Regulatory Flexibility Analysis.

Office of the Chief Accountant

    Title: Amendments to Rule 102(e): Appearance and practice before
the Commission.
    Citation: 17 CFR 201.102.
    Authority: 15 U.S.C. 78a et seq.
    Description: These amendments to the Commission's Rules of Practice
clarify the Commission's standard for determining when accountants
engage in ``improper professional conduct'' such that the Commission
can censure, suspend or bar accountants who appear and practice before
it.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 34-40567,
which was approved by the Commission on October 19, 1998. Comments to
the proposing release and Initial Regulatory Flexibility analysis were
considered at that time.
* * * * *
    Title: Rule 10A-1: Notice to the Commission pursuant to Section 10A
of the Exchange Act.
    Citation: 17 CFR 240.10A-1.
    Authority: 15 U.S.C. 78a et seq.
    Description: These rules are designed to implement the reporting
requirements in Section 10A of the Securities Exchange Act of 1934.
    Prior Commission Determination Under 5 U.S.C. 601: A Final
Regulatory Flexibility Analysis was prepared in accordance with 5
U.S.C. 604 in conjunction with the adoption of Release No. 34-38387,
which was approved by the Commission on March 12, 1997. Comments to the
proposing release and Initial Regulatory Flexibility analysis were
considered at that time.
    The Commission invites public comment on both the list and on the
rules to be reviewed.

    By the Commission.

    Dated: January 14, 2009.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-1173 Filed 1-23-09; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register: January 5, 2007 (Volume 72, Number 3)]
[Notices]
[Page 600-603]
[DOCID:fr05ja07-69]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55007; File No. SR-NASDAQ-2006-053]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change To Assess Previously-Approved
Fees to Former INET Data Recipients

December 22, 2006.
    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 December 7, 2006, The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange''), filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been substantially prepared by Nasdaq.
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

    Nasdaq is proposing to, beginning February 1, 2007, assess the
Commission-approved fee for its TotalView data entitlement to former
INET subscribers and market data vendors that previously received only
the INET ITCH 1.0 and/or INET ITCH 2.0 data feeds which were free of
charge and are now receiving TotalView data from the Nasdaq Market
Center execution system which is fee-liable.

    Commission-approved Nasdaq Rule 7023(a) describes TotalView as
follows:

    The TotalView entitlement allows a subscriber to see all
individual Nasdaq Market Center participant orders and quotes
displayed in the system as well as the aggregate size of such orders
and quotes at each price level in the execution functionality of the
Nasdaq Market Center, including the NQDS feed and the Brut System
Book Feed.

    Nasdaq Rule 7023 states that ``for the TotalView entitlement there
shall be a $70 monthly charge'' and ``a charge of $6 per month per
controlled device for OpenView.'' As described in detail below, as a
result of the Commission's July 14, 2006, approval of Nasdaq's new
Market Center execution system (``NMC Approval Order''),\3\ the INET
ECN no longer exists for the trading of Nasdaq stocks and, therefore,
the INET System Book Feed is no longer available for those stocks.\4\
---------------------------------------------------------------------------

    \3\ Securities Exchange Act Release No. 54155 (Jul. 14, 2006),
71 FR 41291 (Jul. 20, 2006) (SR-NASDAQ-2006-001) (``NMC Approval
Order'').
    \4\ Nasdaq has separately proposed to modify Rule 7023 governing
the user fees for TotalView and OpenView as well as Rule 7019
governing the distributor fees for that data. See SR-NASDAQ-2006-048
and -049.
---------------------------------------------------------------------------

    There is no new rule text.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, Nasdaq 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. Nasdaq 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
Background
    In January of 2001, the Commission approved Nasdaq's proposal to
unify its two existing execution systems--SelectNet and SOES--into a
single execution system \5\ originally known as ``SuperMontage'' and
later re-named the ``Nasdaq Market Center.'' \6\ The order approving
SuperMontage also approved the dissemination of quote and order data
emanating from SuperMontage.
---------------------------------------------------------------------------

    \5\ Securities Exchange Act Release No. 43863 (Jan. 19, 2001),
66 FR 8020 (Jan. 26, 2001) (SR-NASD-99-53).
    \6\ Securities Exchange Act Release No. 50074 (Jul. 23, 2004),
69 FR 45866 (Jul. 30, 2004) (SR-NASD-2004-076).
---------------------------------------------------------------------------

    In November of 2002, Nasdaq received Commission approval to
disseminate a SuperMontage ``depth of book'' product for Nasdaq stocks
called TotalView.\7\ TotalView originally contained data representing
all quotes and orders in Nasdaq stocks trading on Nasdaq's SuperMontage
system. The Commission approved an initial TotalView fee of $150 per
user per month, and later approved Nasdaq's proposal to reduce the fee
to $70 per month for professional users and $14 per month for non-
professional users.\8\ The Commission later approved Nasdaq's proposal
to disseminate an equivalent full depth of book product for NYSE/Amex
stocks.\9\ That product, called ``OpenView,'' contained all quotes and
orders for NYSE/Amex-listed stocks in Nasdaq's execution system. The
Commission-approved fee for OpenView was $6 per user per month.
---------------------------------------------------------------------------

    \7\ Securities Exchange Act Release No. 46843 (Nov. 18, 2002),
67 FR 70471 (Nov. 22, 2002) (SR-NASD-2002-33).
    \8\ Securities Exchange Act Release No. 48581 (Oct. 1, 2003), 68
FR 57945 (Oct. 7, 2003) (SR-NASD-2003-111).
    \9\ Securities Exchange Act Release No. 49349 (Mar. 2, 2004), 69
FR 10775 (Mar. 8, 2004) (SR-NASD-2003-149).
---------------------------------------------------------------------------

    In September of 2004, Nasdaq completed its acquisition of Brut,
Inc., a registered broker-dealer operating the Brut electronic
communications network (``ECN''). Nasdaq operated the Brut ECN side-by-
side with the Nasdaq Market Center. Prior to Nasdaq's acquisition, Brut
disseminated a depth of book data feed containing order information
from the Brut execution system--the Brut System Book Feed--free of
charge to its subscribers and to market data vendors. Following
Nasdaq's acquisition, Brut continued to disseminate the Brut System
Book Feed free of charge. In March of 2005, the Commission approved
Nasdaq's proposal to integrate the Brut System Book Feed into the
TotalView data entitlement thereby rendering the Brut System Book Feed
fee-liable at the same $70 and $14 monthly rates as TotalView. Nasdaq
did not, however, integrate the Brut and Nasdaq Market Center execution
systems; those two systems continued to operate independently and to
disseminate separate data from their separate execution systems.
    On December 7, 2005, Nasdaq acquired INET ATS, Inc., a registered
broker-dealer and member of the NASD, and operator of the INET ATS
(``INET''), and the Commission approved Nasdaq's proposed rule change
to establish rules governing the operation of the INET facility.\10\
Prior to Nasdaq's acquisition, INET disseminated a depth of book data
feed containing order information from the INET execution system--the
INET System Book Feed--free of charge to its subscribers and to market
data vendors. Following Nasdaq's acquisition, INET continued to
disseminate the INET System Book Feed free of charge. Unlike Brut,
Nasdaq did not propose to integrate the INET System Book Feed into the
TotalView data entitlement. Nasdaq continued to operate INET
independently and to disseminate the INET System Book Feed free of
charge to INET subscribers and market data vendors.
---------------------------------------------------------------------------

    \10\ Securities Exchange Act Release No. 52902 (Dec. 7, 2005),
70 FR 73810 (Dec. 13, 2005) (SR-NASD-2005-128).
---------------------------------------------------------------------------

    On February 5, 2006, Nasdaq filed a proposal to integrate Nasdaq's
three execution systems--the Nasdaq Market Center, the Brut ECN, and
the INET ECN--into a single execution system commonly known as the
Nasdaq Single Book.\11\ That proposal was designed to establish the
Single Book as the new Nasdaq Market Center execution system to replace
the existing Nasdaq Market Center execution system formerly known as
SuperMontage. Like its predecessor, the new Nasdaq Market Center
execution system would have three parts: (1) An execution service, (2)
a trade-reporting service, and (3) a data feed service that ``can be
used to display with attribution to Participants'' MPIDs all Quotes and
Displayed Orders on both the bid and offer side of the market for all
price levels then within the Nasdaq Market Center.'' \12\
---------------------------------------------------------------------------

    \11\ Securities Exchange Act Release No. 53583 (Mar. 31, 2006),
71 FR 19573 (Apr. 14, 2006) (SR-NASDAQ-2006-001) (``Single Book
Proposal'').
    \12\ Compare new Nasdaq Rule 4751(a) with previous NASD Rule
4701(a).
---------------------------------------------------------------------------

The Elimination of INET and Brut

    On July 14, 2006, following a lengthy and contentious comment
period, the Commission approved Nasdaq's Single Book Proposal.\13\ As a
result of that approval order, two of Nasdaq's three execution
facilities--Brut and INET--ceased to operate and Nasdaq emerged with a
single, unified execution system, the new Nasdaq Market Center
execution system. When Brut and INET ceased operating as separate
execution facilities, they consequentially lost the ability to offer
separate data feeds. In the Single Book Approval Order, the Commission
itself noted that the Brut and INET facilities would cease to exist:
---------------------------------------------------------------------------

    \13\ See NMC Approval Order, supra note 3.

---------------------------------------------------------------------------

    * * * under this proposal Nasdaq would integrate the Brut and
INET execution systems with the Nasdaq Market Center, utilizing the
INET platform; only Brut's broker-dealer routing functionality would
continue upon the unification of the three trading platforms. Thus,
this proposal could not advantage Nasdaq-affiliated ECNs over other
ECNs because Nasdaq affiliated ECNs would not exist. In addition,
the Commission notes that Nasdaq's acquisitions of Brut and INET
were reviewed and approved by the Commission as positive
developments in the ever-changing, dynamic market environment.\14\
---------------------------------------------------------------------------

    \14\ NMC Approval Order, supra note 3 at 41301.

Thus, the proposal and the Commission order approving it clearly
contemplated that the Brut and INET facilities were to be eliminated
along with their corresponding data feeds.
    In fact, the Commission contemplated the elimination of the Brut
and INET facilities as early as December 2005 when it approved Nasdaq's
rules for operating INET as a subsidiary, as well as in the
Commission's order approving Nasdaq's application to operate as a
national securities exchange:

    In the Commission's approval of Nasdaq's exchange application in
January 2006, the Commission emphasized that Nasdaq's approval was
based on a set of rules with price/time priority. In addition, the
Commission noted in the Exchange Application Order that the two ECNs
that Nasdaq had recently acquired--Brut and INET--both applied rules
that required their orders to be executed in price/time priority. As
discussed above, the Single Book concept of integrating the three
Nasdaq Facilities was discussed by the Commission in the Exchange
Application Order and the Commission believed that such an
integration would be beneficial, though the Commission permitted the
three Nasdaq Facilities to operate separately for a temporary
period, until September 30, 2006, because the Brut and INET
facilities had only been recently acquired by Nasdaq (citations
omitted).\15\

    \15\ Id. at 41303.
---------------------------------------------------------------------------

    To reduce the impact to former Brut and INET users, the new Nasdaq
Market Center system was designed to provide the same depth of book
data that the previous system provided, namely all Nasdaq Market Center
participants' quotes and orders displayed within the system. Like its
predecessor, the new system will disseminate depth of book data in
multiple formats using multiple data feeds.\16\ Because the Nasdaq
Market Center system will provide the same quote and order data in
multiple formats, all Nasdaq, Brut, and INET users can continue to
receive depth of book data in the format that they historically use.
---------------------------------------------------------------------------

    \16\ Prior to the integration, the Nasdaq Market Center issued
the following data: TotalView legacy, which contains depth of book
data for Nasdaq stocks aggregated by price level using the format
developed by Nasdaq; OrderView, which contains depth of book data
for Nasdaq stock on an order-by-order basis; NQDS, which contains
each market participant's best quote in Nasdaq stocks; and OpenView,
which contains each market participant's best quote in NYSE and Amex
stocks. Following the integration, the Nasdaq Market Center also
issues the following feeds: TotalView ITCH, which contains depth of
book data on an attributed and order-by-order basis for Nasdaq,
NYSE, and Amex stocks on a single feed using the ITCH format that
was developed by INET; a separate TotalView ITCH feed containing
depth of book data on an unattributed and order-by-order basis for
Nasdaq, NYSE, and Amex stocks; and another separate TotalView ITCH
feed containing depth of book data aggregated by price level and
attributed for Nasdaq, NYSE, and Amex stocks.
---------------------------------------------------------------------------

Reasonableness of the TotalView Fee

    Nasdaq is required by Section 6(b)(4) of the Act to ``provide for
the equitable allocation of reasonable dues, fees, and other charges
among its members and issuers and other persons'' using its facilities,
and by Section 11A(c)(1)(D) to make market information available on
terms that are ``not unreasonably discriminatory.'' In light of this
statutory mandate, Nasdaq is required to assess the same fee to all
recipients of the same data, in this case TotalView data. Former
recipients of INET ITCH 1.0 and/or INET ITCH 2.0 data feed that choose
to receive Nasdaq TotalView data must pay the same fee for that data as
every other recipient on an equitable and non-discriminatory basis.
    In 2002, the Commission determined that Nasdaq's TotalView fee was
fair and reasonable and Nasdaq is simply proposing to assess that fee
to a group of new users. TotalView is a comprehensive source of Nasdaq
order and quote information, and provides the greatest level of
transparency into the Nasdaq stock market. Nasdaq states that today,
TotalView provides 23 times the liquidity displayed and nearly 5 times
the orders disseminated by the Nasdaq Quotation Dissemination Service
(``NQDS''). Nasdaq's full depth in NYSE- and Amex-listed stocks
(OpenView) also provides access to 40% more liquidity than the top-of-
file quotes provided via the Consolidated Quotation System feed from
the Securities Information Automation Corporation.
    Since the Commission first approved the fee for TotalView, Nasdaq
has lowered that fee from $150 per month to $70 per month for
professional users or $14 per month for non-professional users. In
addition, Nasdaq has augmented the TotalView product many times while
holding the Commission-approved fees constant. In 2004 and 2005, Nasdaq
added to TotalView all data from Nasdaq's opening and closing crosses.
In March of 2005, Nasdaq added to the TotalView entitlement a separate
data feed disseminating depth of book data in an unprocessed, order-by-
order format. Also in 2005, Nasdaq added a separate data feed
containing depth of book data from its Brut Facility. By 2006, Nasdaq
was disseminating via TotalView, depth of book data from the Nasdaq
Market Center (formerly, SuperMontage) and the Brut Facility using
multiple formats and multiple data feeds.
    Integrating the Brut, INET and Nasdaq Market Center systems and
liquidity into a unified whole will further enhance the data available
via TotalView, again with no fee increase to recipients. This
integration came at significant cost to Nasdaq, as the Commission is
aware:

    In addition, Nasdaq endured significant cost in 2005 to acquire
INET and, through the Single Book Proposal, Nasdaq seeks to use the
INET platform as the basis for its Integrated System going forward
in order to provide a faster and more efficient system with greater
capacity. As competition increases both in the United States and
globally, and with the Commission's approval of Regulation NMS,
nearly all national securities exchanges are in the process of
transforming their systems to better compete. Through implementation
of its Single Book Proposal, Nasdaq seeks to maximize the advantages
of the INET trading platform--faster executions and increased
certainty (citations omitted).\17\

    \17\ NMC Approval Order, supra note 3 at 41302.
---------------------------------------------------------------------------

    In assessing its Commission-approved fee for TotalView, Nasdaq is
seeking to recover on a reasonable, equitable and non-discriminatory
basis some of the ``significant cost'' it endured to acquire INET.

Application of the Fee

    This proposal seeks to impose the Commission-approved TotalView fee
to all new TotalView distributors that: (1) distributed INET ITCH 1.0
and/or INET ITCH 2.0 data feed free of charge, and (2) did not
previously distribute TotalView data. Prior to completing the
integration of its execution systems, Nasdaq identified 63 distributors
that meet this test. Of those, 45 chose to execute TotalView
distributor agreements indicating their intentions to distribute
TotalView data at the prevailing TotalView fee schedule and 18 chose
not to execute such agreements. Therefore, Nasdaq believes this
proposal will impact 45 TotalView distributors and their customers.
    Distributors that previously received either TotalView only or both
TotalView and either INET ITCH 1.0 or INET ITCH

2.0 data (or both), would continue to pay TotalView rates at the
TotalView fee schedule. For those firms this in this category who had
previously provided only the INET ITCH 1.0 and/or INET ITCH 2.0 data to
certain customers, and who are able to separately identify these users
from those users as receiving TotalView data via the INET ITCH 1.0 and/
or INET ITCH 2.0 data feed, these users also would be afforded the same
period (until February 1, 2007) to begin their TotalView fee liability.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act \18\ in general, and Section
6(b)(4) of the Act \19\ in particular, in that it provides an equitable
allocation of reasonable fees among users and recipients of the data,
and it makes TotalView data available on a non-discriminatory basis to
similarly situated recipients.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f.
    \19\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq 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. As a general matter, the
Commission has long held the view that ``competition and innovation are
essential to the health of the securities markets. Indeed, competition
is one of the hallmarks of the national market system.'' \20\ The
Commission has also stated ``that the notion of competition is
inextricably tied with the notion of economic efficiency, and the Act
seeks to encourage market behavior that promotes such efficiency, lower
costs, and better service in the interest of investors and the general
public.'' \21\
---------------------------------------------------------------------------

    \20\ Securities Exchange Act Release No. 43863 (Jan. 19, 2001),
66 FR 8020 (Jan. 26, 2001) (SR-NASD-99-53) at 8049.
    \21\ NMC Approval order, supra note 3 at 41298.
---------------------------------------------------------------------------

    The Commission goes on to state its belief ``that the appropriate
analysis to determine a proposal's competitive impact is to weigh the
proposal's overall benefits and costs to competition based on the
particular facts involved, such as examining whether the proposal would
promote economically efficient execution of securities and fair
competition between and among exchange markets and other market
centers, as well as fair competition between the participants of a
particular market.'' \22\ The current proposal is designed to increase
transparency and the efficiency of executions by enabling vendors to
provide additional market data in a cost efficient manner.
---------------------------------------------------------------------------

    \22\ Id.
---------------------------------------------------------------------------

    There is significant competition for the provision of market data
to broker-dealers and other market data consumers, as well as
competition for the orders that generate the data. Nasdaq fully expects
its competitors to quickly respond to this proposal as they have
responded to other Nasdaq data products in the past. Moreover, market
forces have shaped the market data fees that Nasdaq has charged for
this product in the past and will continue to shape those fees in the
future. As noted above, the Commission originally approved a fee of
$150 for TotalView. Nasdaq lowered that fee to $70 and $14 in response
to the lack of demand by vendors and users. Furthermore, NASDAQ
introduced both professional and non-professional Enterprise License
pricing to accommodate firms interest in paying a fixed fee for
unlimited distribution of TotalView data. Vendors simply will only
utilize the service unless and until they conclude that it is
economically beneficial to them and to their users.

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 Nasdaq 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 (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to<EMAIL_ADDRESS>Please include

File Number SR-NASDAQ-2006-053 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NASDAQ-2006-053.
This file number should be included on the subject line if e-mail is
used. To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments,

all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Room. Copies of such
filing also will be available for inspection and copying at the
principal office of Nasdaq. 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-NASDAQ-2006-053 and should be submitted on or before
January 26, 2007.

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E6-22593 Filed 1-4-07; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register: May 6, 2008 (Volume 73, Number 88)]
[Notices]
[Page 25072-25073]
[DOCID:fr06my08-124]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57744; File No. SR-ODD-2008-01]

Self-Regulatory Organizations; The Options Clearing Corporation;
Order Granting Approval of Accelerated Delivery of Supplement to the
Options Disclosure Document Reflecting Changes to Disclosure Regarding
Certain Binary Options and Delayed Start Option Series; and Amendment
to the Options Disclosure Document Front Cover Page To Update the
Markets in Which Options Are Traded

April 30, 2008.
    On December 21, 2007, The Options Clearing Corporation (``OCC'')
submitted to the Securities and Exchange Commission (``Commission''),
pursuant to Rule 9b-1 under the Securities Exchange Act of 1934
(``Act''),\1\ five preliminary copies of a supplement to its options
disclosure document (``ODD'') reflecting changes to disclosure
regarding certain binary options and delayed start option series
(``DSOs'').\2\ The ODD would also be amended to update its front inside
cover page so that it contains a current list of the U.S. exchanges
that trade options issued by the OCC. On April 25, 2008, the OCC
submitted to the Commission five definitive copies of the
supplement.\3\
---------------------------------------------------------------------------

    \1\ 17 CFR 240.9b-1.
    \2\ See letter from Jean M. Cawley, Senior Vice President and
Deputy General Counsel, OCC, to Sharon Lawson, Senior Special
Counsel, Division of Trading and Markets (``Division''), Commission,
dated December 20, 2007.
    \3\ See letter from Jean M. Cawley, Senior Vice President and
Deputy General Counsel, OCC, to Sharon Lawson, Senior Special
Counsel, Division, Commission, dated April 25, 2008.
---------------------------------------------------------------------------

    The ODD currently contains general disclosures on the
characteristics and risks of trading standardized options. Recently,
the American Stock Exchange, LLC amended its rules to permit the
listing and trading of binary options on individual stocks and
exchange-traded funds, also known as fixed return options.\4\ The
Chicago Board Options Exchange, Incorporated amended its rules to
permit the listing and trading of certain DSOs.\5\ The NASDAQ Stock
Market LLC (``Nasdaq'') began trading options March 31, 2008.\6\ The
proposed supplement amends the ODD to accommodate these changes by
providing disclosure regarding certain binary options and DSOs, and to
update the front cover page of the ODD.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 56251 (August 14,
2007), 72 FR 46523 (August 20, 2007) (SR-Amex-2004-27).
    \5\ See Securities Exchange Act Release No. 56855 (November 28,
2007), 72 FR 68610 (December 5, 2007) (SR-CBOE-2006-90). CBOE Rule
24.9(d)(1) permits it to trade DSOs on any security index approved
for options trading on the CBOE.
    \6\ See Securities Exchange Act Release No. 57478 (March 12,
2008), 73 FR 14521 (March 18, 2008) (order approving File Nos. SR-
NASDAQ-2007-004 and SR-NASDAQ-2007-080).
---------------------------------------------------------------------------

    Specifically, the proposed supplement to the ODD adds new
disclosure regarding the characteristics of binary options on
individual equity securities, which includes fund shares, as well as
the special risks of these binary options other than credit default
options.\7\ The proposed supplement to the ODD also adds new disclosure
regarding the characteristics of DSOs and the risks associated with
their purchase and sale. Finally, the ODD would be amended to add
Nasdaq, which currently trades options issued by OCC, and its corporate
address to the front cover page of the ODD. This change will ensure
that the ODD accurately identifies the markets on which options
currently trade. The proposed supplement is intended to be read in
conjunction with the more general ODD, which, as described above,
discusses the characteristics and risks of options generally.\8\
---------------------------------------------------------------------------

    \7\ As noted above, the proposed supplement provides disclosure
that addresses binary options on individual stock options and
exchange-traded fund shares. The Commission also notes that
disclosure on credit default options, which are also binary options,
is currently addressed in the ODD through the previously issued June
2007 supplement. See Securities Exchange Act Release No. 55921 (June
18, 2007), 72 FR 34495 (June 22, 2007) (SR-ODD-2007-03).
    \8\ The Commission notes that the options markets must continue
to ensure that the ODD is in compliance with the requirements of
Rule 9b-1(b)(2)(i) under the Act, 17 CFR 240.9b-1(b)(2)(i),
including when future changes regarding binary options and/or DSOs
are made. Any future changes to the rules of the options markets
concerning binary options and/or DSOs would need to be submitted to
the Commission under Section 19(b) of the Act. 15 U.S.C. 78s(b).
---------------------------------------------------------------------------

    Rule 9b-1(b)(2)(i) under the Act \9\ provides that an options
market must file five copies of an amendment or supplement to the ODD
with the Commission at least 30 days prior to the date definitive
copies are furnished to customers, unless the Commission determines
otherwise, having due regard to the adequacy of information disclosed
and the public interest and protection of investors.\10\ In addition,
five copies of the definitive ODD, as amended or supplemented, must be
filed with the Commission not later than the date the amendment or
supplement, or the amended options disclosure document, is furnished to
customers.

The Commission has reviewed the proposed supplement and finds, having
due regard to the adequacy of information disclosed and the public
interest and protection of investors, that the proposed supplement may
be furnished to customers as of the date of this order.
---------------------------------------------------------------------------

    \9\ 17 CFR 240.9b-1(b)(2)(i).
    \10\ This provision permits the Commission to shorten or
lengthen the period of time which must elapse before definitive
copies may be furnished to customers.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Rule 9b-1 under the Act,\11\
that definitive copies of the proposed supplement to the ODD (SR-ODD-
2008-01), reflecting changes to disclosure regarding binary options,
DSOs and the front cover page, may be furnished to customers as of the
date of this order.
---------------------------------------------------------------------------

    \11\ 17 CFR 240.9b-1.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(39).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-9909 Filed 5-5-08; 8:45 am]

BILLING CODE 8010-01-P