Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 60287

Aviation Administration, 901 Locust 

Street, Kansas City, MO 64106; 

telephone: (816) 329–2524.

SUPPLEMENTARY INFORMATION: This 

amendment to 14 CFR part 71 modifies 

the Class E airspace area extending 

upward from 700 feet above the surface 

at Hannibal, MO. An examination of 

controlled airspace for Hannibal, MO 

revealed that the Hannibal Municipal 

Airport ARP used in the legal 

description for this Class E airspace area 

is incorrect and that the airspace area 

does not comply with airspace 

requirements for diverse departures as 

set forth in FAA Order 7400.2E, 

Procedures for Handling Airspace 

Matters. The examination also identified 

that the description and dimensions of 

the extension to the Class E airspace 

area are not in compliance with FFA 

Order 8260.19C, Flight Procedures and 

Airspace. 

This action expands the Hannibal, 

MO Class E airspace area extending 

upward from 700 feet above the surface 

from a 6-mile radius to a 6.5-mile radius 

of Hannibal Municipal Airport, corrects 

the ARP in the legal description, 

decreases the width of the extension 

from 2.6 to 2.5 miles each side of 

centerline, defines the extension in 

terms of the Hannibal nondirectional 

radio beacon (NDB), includes the 

Hannibal NDB in the legal description 

and brings the legal description of the 

airspace area into compliance with FAA 

Orders 7400.2E and 8260.19C. This area 

will be depicted on appropriate 

aeronautical charts. Class E airspace 

areas extending upward from 700 feet or 

more above the surface of the earth are 

published in paragraph 6005 of FAA 

Order 7400.9M, Airspace Designations 

and Reporting Points, dated August 30, 

2004, and effective September 16, 2004, 

which is incorporated by reference in 14 

CFR 71.1. The Class E airspace 

designation listed in this document will 

be published subsequently in the Order. 

The Direct Final Rule Procedure 

The FAA anticipates that this 

regulation will not result in adverse or 

negative comment and, therefore, is 

issuing it as a direct final rule. Previous 

actions of this nature have not been 

controversial and have not resulted in 

adverse comments or objections. Unless 

a written adverse or negative comment, 

or a written notice of intent to submit 

an adverse or negative comment is 

received within the comment period, 

the regulation will become effective on 

the date specified above. After the close 

of the comment period, the FAA will 

publish a document in the Federal 

Register indicating that no adverse or 

negative comments were received and 

confirming the date on which the final 

rule will become effective. If the FAA 

does receive, within the comment 

period, an adverse or negative comment, 

or written notice of intent to submit 

such a comment, a document 

withdrawing the direct final rule will be 

published in the Federal Register, and 

a notice of proposed rulemaking may be 

published with a new comment period. 

Comments Invited 

Interested parties are invited to 

participate in this rulemaking by 

submitting such written data, views, or 

arguments, as they may desire. 

Comments that provide the factual basis 

supporting the views and suggestions 

presented are particularly helpful in 

developing reasoned regulatory 

decisions on the proposal. Comments 

are specifically invited on the overall 

regulatory, aeronautical, economic, 

environmental, and energy-related 

aspects of the proposal. 

Communications should identify both 

docket numbers and be submitted in 

triplicate to the address listed above. 

Commenters wishing the FAA to 

acknowledge receipt of their comments 

on this notice must submit with those 

comments a self-addressed, stamped 

postcard on which the following 

statement is made: ‘‘Comments to 

Docket No. FAA–2004–18827/Airspace 

Docket No. 04–ACE–53.’’ The postcard 

will be date/time stamped and returned 

to the commenter. 

Agency Findings 

The regulations adopted herein will 

not have a substantial direct effect on 

the States, on the relationship between 

the National Government and the States, 

or on the distribution of power and 

responsibilities among the various 

levels of government. Therefore, it is 

determined that this final rule does not 

have federalism implications under 

Executive Order 13132. 

The FAA has determined that this 

regulation is noncontroversial and is 

unlikely to result in adverse or negative 

comments. For the reasons discussed in 

the preamble, I certify that this 

regulation (1) is not a ‘‘significant 

regulatory action’’ under Executive 

Order 12866; (2) is not a ‘‘significant 

rule’’ under Department of 

Transportation (DOT) Regulatory 

Policies and Procedures (44 FR 11034, 

February 26, 1979); and (3) if 

promulgated, will not have a significant 

economic impact, positive or negative, 

on a substantial number of small entities 

under the criteria of the Regulatory 

Flexibility Act.

List of Subjects in 14 CFR Part 71

Airspace, Incorporation by reference, 

Navigation (air).

Adoption of the Amendment

■ Accordingly, the Federal Aviation 

Administration amends 14 CFR part 71 

as follows:

PART 71—DESIGNATION OF CLASS A, 

CLASS B, CLASS C, CLASS D, AND 

CLASS E AIRSPACE AREAS; 

AIRWAYS; ROUTES; AND REPORTING 

POINTS

■ 1. The authority citation for part 71 

continues to read as follows:

Authority: 49 U.S.C. 106(g), 40103, 40113, 

40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–

1963 Comp., p. 389.

§ 71.1 [Amended]

■ 2. The incorporation by reference in 14 

CFR 71.1 of Federal Aviation 

Administration Order 7400.9M, dated 

August 30, 2004, and effective 

September 16, 2004, is amended as 

follows:

* * * * *

Paragraph 6005 Class E airsapce areas 

extending upward from 700 feet or more 

above the surface of the earth.

* * * * *

ACE MO E5 Hannibal, MO 

Hannibal Municipal Airport, MO 

(Lat. 39°43′28′′ N., long. 91°26′37′′ W.) 

Hannibal NDB 

(Lat. 39°43′38′′ N., long. 91°26′55′′ W.)

That airspace extending upward from 700 

feet above the surface within a 6.5-mile 

radius of Hannibal Municipal Airport and 

within 2.5 miles each side of the 159° bearing 

from the Hannibal NDB extending from the 

6.5-mile radius of the airport to 7 miles 

southeast of the NDB.

Issued in Kansas City, MO, on September 

29, 2004. 

Paul J. Sheridan, 

Manager, Air Traffic Division, Central Region.

[FR Doc. 04–22747 Filed 10–8–04; 8:45 am] 

BILLING CODE 4910–13–M

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 232, 240, and 249 

[Release No. 34–50486; File No. S7–18–04] 

RIN 3235–AJ20 

Proposed Rule Changes of SelfRegulatory Organizations

AGENCY: Securities and Exchange 

Commission.

ACTION: Final rule.

60288 Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 

1Securities Exchange Act Release No. 49505 

(March 30, 2004), 69 FR 17864 (April 5, 2004).

2See letters and emails to Jonathan G. Katz, 

Secretary, Commission, from: James J. Angel, Ph.D., 

CFA, Associate Professor of Finance, McDonough 

School of Business, Georgetown University, dated 

May 14, 2004 (‘‘Angel’’); Barry S. Augenbraun, 

Senior Vice President, Raymond James Financial, 

Inc, dated April 22, 2004 (‘‘Raymond James’’); 

Charlotte M. Bahin, Senior Vice President, 

Regulatory Affairs, America’s Community Bankers, 

dated June 3, 2004 (‘‘ACB’’); R. Gerald Baker, 

Compliance and Regulatory Consultant, dated June 

4, 2004 (‘‘Baker’’); Kim Bang, President, Bloomberg 

Tradebook LLC, dated June 8, 2004 (‘‘BT’’); Donald 

F. Donahue, President, National Securities Clearing 

Corporation, dated July 16, 2004 (‘‘NSCC’’); Dorothy 

M. Donohue, Associate Counsel, Investment 

Company Institute, dated June 4, 2004 (‘‘ICI’’); 

Edward S. Knight, Executive Vice President, The 

Nasdaq Stock Market, Inc., dated June 14, 2004 

(‘‘Nasdaq’’); Michael L. Kosoff, dated June 16, 2004 

(‘‘Kosoff’’); Joanne Moffic-Silver, General Counsel 

and Corporate Secretary, Chicago Board Options 

Exchange, Inc., dated June 16, 2004 (‘‘CBOE’’); 

William H. Navin, Executive Vice President, 

General Counsel and Secretary, The Options 

Clearing Corporation, dated May 27, 2004 (‘‘OCC’’); 

Ellen J. Neely, Senior Vice President and General 

Counsel, Chicago Stock Exchange, Inc., dated June 

4, 2004 (‘‘CHX’’); Junius W. Peake, Monfort 

Distinguished Professor of Finance, Kenneth W. 

Monfort College of Business, University of Northern 

Colorado, dated May 4, 2004 (‘‘Peake’’); Edward L. 

Pittman, Esq., Thelen Reid & Priest LLP, dated May 

28, 2004 (‘‘Thelen’’); John Polanin, Jr., Chairman, 

SIA Self-Regulation and Supervisory Practices 

Committee, Securities Industry Association, dated 

June 4, 2004 (‘‘SIA’’); Michael J. Ryan, Jr., Executive 

Vice President and General Counsel, American 

Stock Exchange LLC, dated June 15, 2004 

(‘‘Amex’’); Thomas W. Sexton, Vice President and 

General Counsel, National Futures Association, 

dated June 4, 2004 (‘‘NFA’’); Michael J. Simon, 

Senior Vice President and Secretary, International 

Securities Exchange, Inc., dated June 4, 2004 

(‘‘ISE’’); Joseph Smith, Feldman Weinstein LLP, 

dated April 13, 2004 (‘‘Smith’’); Darla C. Stuckey, 

Corporate Secretary, New York Stock Exchange, 

Inc., dated July 14, 2004 (‘‘NYSE’’); and Elisse B. 

Walter, Executive Vice President, Regulatory Policy 

and Programs, National Association of Securities 

Dealers, Inc., dated June 7, 2004 (‘‘NASD’’).

3CBOE at 1; BT at 1; Amex at 1; Nasdaq at 1; 

NASD at 1; CHX at 1; NFA at 1; ACB at 1; Thelen 

at 1; OCC at 1; NYSE at 1; SIA at 1–2; ISE at 1; Baker 

at 1; Angel at 1; Peake at 1; Raymond James at 1; 

Smith at 1; ICI at 1; Baker at 1.

4American Stock Exchange LLC, Boston Stock 

Clearing Corporation, Boston Stock Exchange, Inc., 

Chicago Board Options Exchange, Inc., Chicago 

Mercantile Exchange, Inc., Chicago Stock Exchange, 

Inc., The Depository Trust Co., Emerging Markets 

Clearing Corporation, Fixed Income Clearing 

Corporation, INET Futures Exchange, LLC, 

International Securities Exchange, Inc., Midwest 

Clearing Corporation, Midwest Securities Trust Co., 

Municipal Securities Rulemaking Board, National 

Association of Securities Dealers, Inc., National 

Futures Association, National Securities Clearing 

Corporation, The National Stock Exchange, Inc.

(f/k/a Cincinnati Stock Exchange, Inc.), New York 

Stock Exchange, Inc., NQLX, LLC, One Chicago, 

LLC, The Options Clearing Corporation, Pacific 

Exchange, Inc., Pacific Clearing Corporation, Pacific 

Securities Depository Trust, Co., Philadelphia Stock 

Exchange, Inc., and Stock Clearing Corporation of 

Philadelphia.

SUMMARY: The Securities and Exchange 

Commission (‘‘Commission’’) is 

adopting rule amendments that require 

self-regulatory organizations (‘‘SROs’’) 

to file proposed rule changes 

electronically with the Commission, 

rather than in paper form. In addition, 

the Commission is requiring SROs to 

post all proposed rule changes, as well 

as current and complete sets of their 

rules, on their Web sites. The 

Commission is also requiring all 

participants in National Market System 

Plans (‘‘NMS Plans’’) to arrange for 

posting on a designated Web site a 

current and complete version of the 

NMS Plan. Finally, the Commission is 

making certain technical amendments to 

the requirements for SRO rule changes. 

Together, the amendments are designed 

to modernize the SRO rule filing process 

by making it more efficient and cost 

effective. The amendments also should 

improve the transparency of the rule 

filing process and assure that all SRO 

members and other interested persons 

have ready access to an accurate, up-todate version of SRO rules.

DATES: Effective November 8, 2004, 

except § 240.11Aa3–2(b)(8) and 

§ 240.19b–4(m), shall be effective May 9, 

2005.

FOR FURTHER INFORMATION CONTACT:

Florence Harmon, Senior Special 

Counsel (202–942–0773); Elizabeth 

Badawy, Accountant (202–942–0740); 

Joseph Morra, Special Counsel (202–

942–0781); Sonia Trocchio, Special 

Counsel (202–942–0753); Cyndi N. 

Rodriguez, Special Counsel (202–942–

4163); Michael L. Milone, Special 

Counsel (202–942–0179) (clearance and 

settlement SROs); Timothy Fox, 

Attorney (202–942–0146); Molly Kim, 

Attorney (202–942–8987), Division of 

Market Regulation, Securities and 

Exchange Commission, 450 Fifth Street, 

NW., Washington, DC 20549–1001.

SUPPLEMENTARY INFORMATION: 

I. Introduction 

On March 30, 2004, the Commission 

proposed changes to the process by 

which SROs file proposed rule changes 

with the Commission that were 

designed to make the process more 

efficient and transparent, while 

reducing costs for the SROs and the 

public.1 The Commission proposed 

amending Rule 19b–4 and Form 19b–4 

to (1) require SROs to file proposed rule 

changes with the Commission 

electronically, rather than in paper 

format; (2) mandate that SROs promptly 

post on their Web sites a copy of all 

proposed rule changes filed with the 

Commission; (3) require SROs to 

maintain a current and complete version 

of their rules on their Web sites; and (4) 

make certain technical amendments to 

clarify Rule 19b–4 and to reflect current 

practice. The Commission also solicited 

comment on whether the participants in 

NMS Plans should be required to post 

on a public Web site to be designated by 

the Plan participants a current version 

of the applicable Plans, as well as 

amendments to such Plans, no later than 

the next business day after effectiveness 

of such Plan or amendment.

The Commission received 21 

comment letters in response to its 

request for comments.2 Commenters 

expressed general support for the 

proposal, commending the 

Commission’s efforts to make the rule 

filing process more efficient and 

transparent and to reduce costs,3 and 

suggested other ways to improve the 

process. The Commission has 

determined to adopt the amendments 

substantially as proposed, with some 

modifications to address some of the 

comments the Commission received. 

Twenty-seven SROs 4— the 13 national 

securities exchanges, the 11 clearing 

agencies, and the two national securities 

associations and the Municipal 

Securities Rulemaking Board—are 

subject to these amendments. The 

Commission also is providing further 

clarification and guidance on the 

application of amended Rule 19b–4.

II. Amendments to Rule 19b–4 

A. Electronic Filing

The Commission proposed to 

modernize the rule filing process by 

requiring SROs to file proposed rule 

changes electronically with the 

Commission through a Web-based 

system. To implement electronic filing 

of SRO proposed rule changes, the 

Commission proposed to amend Rule 

19b–4 and Form 19b–4 to require SROs 

to file all proposed rule changes on 

Form 19b–4, and any amendments to 

Form 19b–4, electronically with the 

Commission in accordance with the 

procedures and in the format specified 

in Rule 19b–4 and Form 19b–4. Each 

SRO would be given access to a secure 

Web site, the Electronic Form 19b–4 

Filing System (‘‘EFFS’’), which would 

enable authorized individuals at the 

SRO to file with the Commission an 

electronic Form 19b–4 on behalf of the 

SRO. Each SRO would determine which 

individual or individuals to supply with 

User IDs and passwords to allow access 

to the secure Web site. The current 

requirement in Form 19b–4 that SROs 

submit multiple paper copies of 

proposed rule changes to the 

Commission would be eliminated. 

Under the proposal, a proposed rule 

change would be deemed filed with the 

Commission on the business day that 

the SRO electronically submits the

Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 60289

5CBOE at 1–2; ICI at 1–2; Amex at 1; CHX at 1; 

NASD at 2; ISE at 1; NFA at 2.

6CBOE at 2; NASD at 3; CHX at 1–2; NFA at 2; 

OCC at 1–2; NYSE at 1. Similarly, one commenter 

suggested that if technical difficulties prevent an 

SRO from filing a proposed rule change 

electronically, an SRO should be excluded from 

posting the proposed rule change on its Web site 

if the same technical issues involve its Web site. 

CHX at 2. Another commenter suggested the 

Commission include an explicit exemption for the 

posting of proprietary information on the SRO’s 

Web site. NSCC at 2.

7NFA requests that the requirement for electronic 

filing be extended to include proposed rule changes 

filed pursuant to Form 19b–7. NFA at 1–2. ACB 

encourages the Commission to require the PCAOB 

to file proposed rule changes electronically. ACB at 

2. One commenter suggested that all filings by SROs 

and alternative trading systems, including Forms 1 

and periodic supplemental filings, should be 

electronic and available to the public on EDGAR. 

Angel at 1–3.

8CBOE at 4; Nasdaq 2; NFA at 2; NYSE at 3.

9See generally, CBOE at 2; NASD at 3; CHX at 

2; OCC at 3; NYSE at 3.

10NFA at 4.

11See, e.g., NASD at 3; CHX at 2; NYSE at 3.

12Section 3(a)(26) of the Act, 15 U.S.C. 78c(a)(26), 

defines the term ‘‘self-regulatory organization’’ to 

mean any national securities exchange, registered 

securities association, registered clearing agency, 

and, for purposes of section 19(b) and other limited 

purposes, the Municipal Securities Rulemaking 

Board (‘‘MSRB’’). Currently, there are 27 SROs that 

file proposed rule changes with the Commission. 

Section 107 of the Sarbanes-Oxley Act of 2002 

provides that the Public Company Accounting 

Oversight Board (‘‘PCAOB’’) shall file proposed rule 

changes with the Commission ‘‘as if the Board were 

a registered securities association for purposes of 

that section 19(b). * * *’’ 15 U.S.C. 7217(b)(4). 

Because PCAOB rule filings are not tracked by the 

SRO Rule Tracking System (‘‘SRTS’’), the Division 

of Market Regulation’s (‘‘Division’’) internal 

tracking database for rule filings, the Commission 

is not requiring, at this time, the PCAOB to file 

electronically its proposed rules. Further, as the 

proposal for web posting of proposed and final SRO 

rules is designed to make the SRO rule filings in 

the SRTS accessible to the public in a uniform 

manner, the Commission does not intend for these 

proposed amendments to apply to the PCAOB.

13The Commission believes that to be filed, a 

proposed rule change must be accurate, consistent, 

and complete in order to provide the public with 

an opportunity to meaningfully comment on the 

proposal. SROs must provide all of the information 

requested in Form 19b–4, including the exhibits, 

and must present the information in a clear and 

comprehensible manner. The Commission 

encourages SRO staff to review carefully proposed 

rule changes to ensure, among other things, that the 

filings: (1) Contain a properly completed Form 19b–

4; (2) contain a clear and accurate statement of the 

authority for, and basis and purpose of, such 

proposed rule change, including the impact on 

competition; (3) contain a summary of any written 

comments received by the SRO; and (4) state that 

the proposal is not inconsistent with the existing 

rules of the SRO, including any other rules 

proposed to be amended. Currently, filings that do 

not comply with these conditions are deemed not 

filed and returned to the SRO. Consistent with the 

requirements of Rule 19b–4 and Form 19b–4, 

electronically filed proposed rule changes that do 

not comply with the foregoing will continue to be 

returned to the SRO, electronically, and consistent 

with current practice, will be deemed not filed with 

the Commission until all required information has 

been provided.

proposed rule change to the 

Commission, as long as (1) the 

Commission receives the proposed rule 

change on or before 5:30 p.m., eastern 

standard time or eastern daylight saving 

time, whichever is currently in effect; 

and (2) the SRO files the proposed rule 

change in accordance with the 

requirements of Rule 19b–4 and Form 

19b–4, as amended. 

On the rare occasion where an SRO 

may be unable to file documents 

electronically, such as comment letters 

that the SRO received in advance of 

filing the proposed rule change with the 

Commission, exhibits, and proprietary 

information subject to a request for 

confidential treatment, the 

Commission’s proposal retained the 

flexibility to allow SROs to file portions 

of a proposed rule change in paper 

format under limited circumstances. 

Regarding signature requirements, the 

Commission proposed to amend Form 

19b–4 so that a ‘‘duly authorized 

officer’’ of an SRO would be required to 

file proposed rule changes with an 

electronic signature. Additionally, the 

proposal would require each duly 

authorized signatory to obtain a digital 

ID to provide both the Commission and 

the SRO with further assurances about 

the authenticity and integrity of the 

electronically-submitted Form 19b–4. 

Each signatory also would be required 

to manually sign the Form 19b–4, 

authenticating, acknowledging, or 

otherwise adopting his or her electronic 

signature that is attached to or logically 

associated with the filing. In accordance 

with Rule 17a–1 under the Securities 

Exchange Act of 1934 (‘‘Act’’), the SRO 

would be required to retain that manual 

signature page of the rule filing, 

authenticating the signatory’s electronic 

signature, for not less than five years 

after the Form 19b–4 is filed with the 

Commission, and, upon request, furnish 

a copy of it to the Commission or its 

staff. 

Generally, commenters embraced the 

concept of electronic filing of proposed 

rule changes with the Commission.5

Some commenters offered suggestions of 

ways they believe the Commission’s 

proposal could be improved. For 

example, six commenters believe that 

SROs should retain the ability to file 

paper copies of proposed rule changes 

with the Commission in limited 

circumstances, such as instances where 

there are computer malfunctions or 

systems outages.6 Three commenters 

suggested the Commission extend the 

requirement for electronic filing to 

include other types of proposed rule 

changes and filings with the 

Commission.7 Four commenters offered 

suggested revisions to electronic Form 

19b–4 as proposed.8

A number of commenters focused on 

the proposal’s requirement that a paper 

signature page of the Form 19b–4 be 

manually signed by a duly authorized 

signatory and retained by an SRO.9

While one commenter did not object to 

the record keeping requirements for the 

hard copy of a signature page,10 other 

commenters objected to the requirement 

that a duly authorized signatory sign 

and an SRO retain a paper signature 

page, saying the requirements were 

unnecessary.11

The Commission is adopting the 

amendments regarding electronic filing 

of SRO proposed rule changes 

substantially as proposed. 12 The 

Commission believes that requiring 

SROs to file proposed rule changes 

electronically will have many benefits, 

including (1) a reduction in the amount 

of time and labor required to process 

SRO rule filings by eliminating paper 

delivery, photocopying, and 

distribution; (2) a reduction in costs for 

SROs; (3) more efficient use of 

Commission resources; and (4) more 

efficient and accurate monitoring by 

Commission staff of proposed rule 

changes due to the integration of SRO 

electronic filing with the SRTS, the 

internal Commission database that 

tracks these filings.

Therefore, as of 5:30 p.m. eastern 

standard time on November 5, 2004, the 

Commission will no longer accept SRO 

proposed rule changes in paper format. 

Beginning at 9 a.m. eastern standard 

time on November 8, 2004, SROs will be 

required to file all Forms 19b–4 and any 

amendments to Forms 19b–4 

electronically, according to the 

procedures and in the format described 

in Rule 19b–4 and Form 19b–4, as 

amended. SROs will gain access to a 

secure Web site to enable authorized 

individuals to file proposed rule 

changes with the Commission 

electronically. Proposed rule changes 

will be deemed filed on the business 

day the Commission receives the 

proposed rule change electronically, 

provided the Commission receives the 

filing before 5:30 p.m. eastern standard 

time or eastern daylight saving time, 

whichever is in effect at the time of 

filing, and it is filed in accordance with 

Rule 19b–4 and Form 19b–4 as 

amended.13 The Commission has 

eliminated the requirement that SROs 

submit multiple paper copies of 

proposed rule changes.

The Commission recognizes that in 

rare circumstances SROs may be unable 

to file certain documents electronically 

with the Commission. Therefore, under 

limited circumstances, the Commission

60290 Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 

14This exception from electronic filing does not 

apply to the Form 19b–4 and Exhibit 1 but will only 

be applicable to Exhibits 2 and 3 of the Form and 

any documents filed pursuant to a request for 

confidential treatment pursuant to the Freedom of 

Information Act, 5 U.S.C. 552. 15Most proposed rule changes filed pursuant to 

section 19(b)(2) of the Act are published for notice 

and comment and approved not sooner than the 

30th day after notice of filing of the proposed rule 

change appeared in the Federal Register. With 

regard to proposed rule changes filed pursuant to 

section 19(b)(3)(A) of the Act, the Commission 

believes that the failure to file these proposed rule 

changes on a particular date will not result in harm 

to SROs, their members, or investors. If an SRO 

wishes to extend an existing pilot program by filing 

a proposed rule change pursuant to section 

19(b)(3)(A) of the Act, and Rule 19b–4(f)(6) 

thereunder, the SRO should file the proposed rule 

change in advance of the last business day before 

the pilot’s expiration, to ensure that the 

Commission receives the proposed extension in a 

timely fashion to prevent a lapse in the pilot’s 

operation.

16 17 CFR 240.0–12.

17 15 U.S.C. 78mm(a)(1).

18Additionally, in emergency situations, where 

an SRO can demonstrate that implementation of a 

proposed rule change is necessary for the protection 

of investors, the maintenance of fair and orderly 

markets, or the safeguarding of securities or funds, 

section 19(b)(3)(B) of the Act permits the 

Commission to put the proposed rule change into 

effect summarily. In such situations, the SRO will 

be required to file the proposed rule change 

promptly thereafter pursuant to section 19b(3)(B) of 

the Act. 15 U.S.C. 78s(b)(3)(B).

19 ISE at 1.

20SIA at 2.

21NASD at 7.

22SIA at 2; ICI at 1–2.

23Thelen at 2. The commenter said that there are 

instances where ‘‘SROs will begin assessing fees 

based on the new rules before any members of the 

industry affected by the filing have had a chance 

to review them.’’ Id. According to the commenter, 

proposed rule changes should be given the same 

transparency as Commission rule proposals and the 

electronic filings of public companies. Id.

24CBOE at 2. The Commission notes that a 

proposed rule change filed after 5:30 p.m. would 

not be considered filed on that business day. Thus, 

determination of the time period for Web site 

posting of the proposed rule change would be 

calculated from the next business day.

25NASD at 7–8; CHX at 2; NFA at 2–3; OCC at 

3.

will allow SROs to file documents in 

paper format.14 For example, the 

Commission will allow SROs to file 

materials for which confidential 

treatment is requested in paper format. 

In addition, the Commission will allow 

SROs to file, in paper format, comment 

letters that the SRO received from its 

members before the SRO filed the 

proposed rule change with the 

Commission, so long as the SRO has 

demonstrated it is unable to convert the 

comment letters to electronic format. 

However, the Commission notes that, 

given advances in technology, it is 

increasingly simple and economical for 

SROs to scan paper documents for 

conversion to electronic format, so the 

ongoing need for this exception should 

be limited and of relatively short 

duration.

The Commission has determined that 

an explicit exception from the electronic 

rule filing requirements for 

‘‘emergency’’ situations is unnecessary. 

Proposed rule changes are usually not 

so time-sensitive that failure to file them 

with the Commission on a particular 

date will result in negative 

consequences to SROs, their members, 

or investors.15 In the rare situation 

where an SRO can demonstrate to the 

Commission that its inability to file a 

proposed rule change electronically on 

that particular date will cause harm to 

the SRO, its members, or investors, the 

Commission would consider 

appropriate relief to enable the SRO to 

file the proposed rule change in paper 

format. In such emergency situations, 

the Commission could consider an 

SRO’s exemption request from the 

electronic rule filing requirements of 

section 19(b) of the Act pursuant to Rule 

0–12 of the Act 16 and section 36(a)(1) of 

the Act 17 ‘‘to the extent that such 

exemption is necessary or appropriate 

in the public interest, and is consistent 

with the protection of investors.’’ In 

making such findings, the Commission 

would consider important the existence 

of factors such as (1) an extended 

electronic outage at the SRO facility or 

at the Commission; (2) a pressing need 

for implementation of the proposed rule 

change; and (3) a failure of back-up 

facilities.18 The Commission notes that 

SROs, in their business continuity 

planning, should ensure that they have 

appropriate back-up facilities to 

accommodate electronic filing of 

proposed rule changes.

Some commenters objected to the 

proposed provision that would require 

each duly authorized signatory to a 

proposed rule change to manually sign 

the Form 19b–4, authenticating, 

acknowledging, or otherwise adopting 

his or her electronic signature, and the 

requirement that the SRO retain that 

manual signature page of the rule filing 

for not less than five years after the 

Form 19b–4 is filed with the 

Commission pursuant to Rule 17a–1 

under the Act. With the advent of 

electronic filing, the administrative 

burden on SROs should be significantly 

reduced. The Commission believes the 

authentication and related 

recordkeeping requirements are 

necessary to assure the integrity of the 

electronic rule filing process and does 

not believe they are unduly 

burdensome. Accordingly, the 

Commission has determined to adopt 

the provisions as proposed.

B. Posting of Proposed Rule Changes on 

SRO Web Sites 

The Commission also proposed to 

amend Rule 19b–4 to require each SRO 

to post all proposed rule changes, and 

any amendments thereto, on its public 

Web site no later than the next business 

day after filing with the Commission. 

Under the proposal, a copy of the 

complete proposed rule change would 

continue to be made available in the 

Commission’s Public Reference Room. 

The Commission stated that requiring 

SROs to post proposed rule changes and 

amendments on their public Web sites 

promptly after filing with the 

Commission would (1) provide 

interested persons with quick access to 

proposed rule changes; (2) facilitate the 

ability of interested persons to comment 

on proposed rule changes; (3) eliminate 

SRO expenses currently used to monitor 

the Commission’s Public Reference 

Room for proposed rule changes filed by 

other SROs; and (4) enhance the 

transparency of the rule filing process 

by providing ready access to proposed 

rule changes and facilitating public 

comment on them. The Commission 

also solicited comment on whether the 

SRO should update its Web site to 

reflect proposed rule filings that are 

deemed not properly filed and returned 

to the SRO or withdrawn by the SRO. 

In general, commenters supported the 

proposed requirement that SROs post 

their proposed rule changes and 

amendments to proposed rule changes 

on their Web sites, citing greater public 

access to information on a uniform 

basis,19 improved ability to monitor and 

comment on proposed SRO rule 

changes,20 and improved ability to 

inform SRO members, investors, 

regulators, and other interested parties 

about SRO rulemaking efforts.21

With regard to the proposed provision 

that SROs post on their public Web sites 

all proposed rule changes and 

amendments no later than the next 

business day after filing them with the 

Commission, the commenters’ response 

was varied. Two commenters expressed 

general support for this requirement,22

and one commenter stated a one-day 

grace period for proposals that are filed 

pursuant to section 19(b)(3)(A) of the 

Act is too long.23 One commenter asked 

for clarification to determine whether a 

proposed rule change filed after 5:30 

p.m. must be posted on its Web site the 

following business day or after two 

business days.24

Four commenters stated that the next 

business day posting requirement is too 

short a timeframe for SROs to 

reasonably comply.25 Instead, these

Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 60291

26NASD at 7–8 (five days); CHX at 2 (three days); 

NFA at 2–3 (two or three days); OCC at 3 (suggests 

Commission rules provide SROs with additional 

time to post proposed rule changes when an SRO’s 

Web site is unavailable for modifying content, such 

as during unexpected maintenance which could 

affect its ability to post a rule filing within the 

required timeframe).

27Once the Commission has approved a proposed 

rule change filed pursuant to section 19(b)(2) of the 

Act or the 60-day abrogation period has expired of 

a proposed rule change filed pursuant to section 

19(b)(3)(A) of the Act, and the SRO has updated its 

rules posted on its Web site pursuant to Rule 19b–

4(m), the Commission would not require SROs to 

continue posting the Form 19b–4 on their Web 

sites. An SRO, of course, may elect to archive such 

documents on the SRO’s Web site.

28A screen within EFFS will indicate that a rule 

filing has not been properly filed and has been 

returned to the SRO.

29Under the proposal, if the Commission 

approved a proposed rule change, but an SRO does 

not intend to implement the change upon approval, 

an SRO would be required to indicate clearly the 

implementation date in the pertinent rule text.

30CBOE at 2; Amex at 1; NASD at 9; CHX at 3; 

ICI at 2; Thelen at 2; Raymond James at 1; NYSE 

at 2; SIA at 4; ISE at 1; NFA at 3.

31See, e.g. Kosoff at 1–2 (extend requirement to 

include access to an archive of past rules and 

regulations and provide a link to their rules from 

the SEC’s Web site; also, require SRO Web sites to 

provide links to all relevant Securities Acts). See 

also NYSE at 3 (SEC may wish to post all of the 

SROs’ rules on the Commission’s Web site).

32 ICI at 2.

33See Amex at 2; Nasdaq at 2; NASD at 9–10; 

CHX at 3–4; NFA at 3; OCC at 2–3; NYSE at 2.

34CHX at 3–4.

35NASD at 10.

36See, e.g., Nasdaq at 2; NASD at 9–10, NYSE at 

2.

37Amex at 1–2; NASD at 10–11; OCC at 2; NYSE 

at 2.

38 Despite the delayed effective date for 

implementation of Web site posting of complete 

and current rule text, the Commission encourages 

SROs to seriously consider posting updated rule 

text on their Web sites as soon as possible to further 

transparency and the other goals described herein.

commenters suggested alternatives 

ranging from two to five days.26

The Commission has decided to adopt 

an amendment requiring SROs to post 

proposed rule changes on their public 

Web sites within two business days, 

instead of within one business day as 

proposed. The Commission believes all 

market participants, investors, and other 

interested parties should have access to 

SRO proposed rule changes filed with 

the Commission, and any amendments, 

as soon as practicable and, given the 

concerns expressed by commenters, that 

a two-business-day timeframe strikes 

the appropriate balance. The 

Commission notes that an SRO controls 

the timing of filing proposed rule 

changes and amendments and can 

assure that its technology staff is 

prepared to post the proposed rule 

change on the SRO’s public Web site 

within two business days of filing with 

the Commission.27 The Commission is 

also adopting amendments requiring 

SROs to remove proposed rule filings 

that are deemed not properly filed and 

returned to SROs or withdrawn by SROs 

from their Web sites within two 

business days from Commission 

notification of improper filing or SRO 

withdrawal of the proposed rule.28

C. Posting of Current and Complete Rule 

Text on SRO Web Sites 

The Commission proposed to amend 

Rule 19b–4 to require SROs to post and 

maintain a current and complete version 

of their rules on their public Web sites. 

Under the proposal, each SRO would be 

required to update its public Web site to 

reflect changes to its rules no later than 

the next business day after it has been 

notified by the Commission that the 

Commission has approved a proposed 

rule change, or in the case of proposed 

rule changes filed pursuant to section 

19(b)(3)(A) of the Act, that the 

Commission has issued a release 

providing notice of filing and immediate 

effectiveness of a proposed rule change. 

The Commission proposal that one 

business day be the timeframe for 

posting changes to SRO rules was 

designed to ensure that interested 

persons would have prompt access to 

accurate and complete SRO rules, while 

allowing SROs sufficient time to comply 

with the posting requirement.29

The Commission believes that prompt 

posting of current and complete rule 

text on SRO Web sites will enhance 

compliance with SRO rules and provide 

interested parties with easy access to 

current, reliable, and complete versions 

of SRO rules. 

Eleven commenters expressed general 

support for requiring SROs to post and 

maintain a current and complete version 

of their rules on their public Web 

sites.30 Some commenters provided 

additional suggestions relating to the 

posting of SRO rules on SRO Web 

sites.31

While there was support for requiring 

SROs to update their Web sites to reflect 

changes to their rules within one 

business day after Commission 

notification of the Commission’s 

approval of proposed rule changes,32

several commenters believe that the 

requirement does not provide the SROs 

with enough time to comply.33 The 

commenters offered many alternatives 

to the one-business-day posting 

requirement, ranging from three 

business days 34 to 15 business days.35

Others suggested that the Commission 

allow SROs the flexibility to decide 

when to update their Web sites with 

approved rules or effective-upon-filing 

rule changes.36

The Commission has determined to 

adopt an amendment requiring SROs to 

post and maintain a current and 

complete version of their rules on their 

public Web sites within two business 

days after electronic notification by the 

Commission that the Commission has 

approved a proposed rule change, or in 

the case of proposed rule changes filed 

pursuant to section 19(b)(3)(A) of the 

Act, that the Commission has issued a 

release providing notice of filing and 

immediate effectiveness of a proposed 

rule change. The Commission believes it 

is critical to assure interested persons 

have prompt access to accurate and 

complete SRO rules and does not 

believe that a two-business-day 

timeframe is impractical or unduly 

burdensome on SROs. An SRO is well 

aware of rule language it has proposed 

in advance of Commission approval. 

During the notice and comment period, 

the SRO should take steps to ensure that 

its Web site will be updated to reflect 

the new rule language within two 

business days of electronic notification 

by the Commission that it has approved 

the proposed rule change. 

Four commenters expressed concern 

about the manner in which the 

Commission will provide notice to an 

SRO that the Commission has approved 

a proposed rule change or issued notice 

of a proposed rule change filed pursuant 

to section 19(b)(3)(A) of the Act.37 In 

this regard, the Commission has 

determined to and will develop an 

affirmative electronic notification to 

SROs via EFFS, the Web-based 

electronic rule filing system, that a 

proposed rule change has been 

approved or an effective-upon-filing 

rule change has been noticed by the 

Commission. The Commission expects 

to have an electronic notification to be 

made through a specific EFFS screen 

that provides multiple users at the SRO 

access to an electronic version of the 

Commission’s approval order or notice 

of effective-upon-filing rule. To allow 

time for development of such electronic 

notification process, the Commission is 

delaying effectiveness of the 

requirement for SRO rules to be updated 

on the relevant Web site within two 

business days following notification of 

approval or notice by the Commission.38

With such electronic notification in 

place, the Commission believes that the 

proposed amendments will provide an 

efficient and prompt procedure for it to 

notify SROs of approval of a proposed 

rule change or notice of an effectiveupon-filing rule.

Accordingly, an SRO should have 

immediate notice of the event that 

triggers its duty to update its rules 

within two business days. The

60292 Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 

39 69 FR 17864, 17868.

40NASD at 7; Thelen at 3; OCC at 2; BT at 2; 

NYSE at 2.

41NASD at 7; Thelen at 3; OCC at 2; BT at 2; 

NYSE at 2.

42See, e.g., NASD at 7.

43See, e.g., Thelen at 3.

44NYSE at 2.

45NYSE at 2; OCC at 2.

46 17 CFR 240.11Aa3–2(c). A Plan participant 

encountering difficulties in ensuring that a current 

and complete Plan is posted pursuant to the rule 

may apply to the Commission for appropriate relief.

47 17 CFR 240.11Aa3–2(b).

48Once the Commission has approved pursuant 

to Rule 11Aa3–2(c) an amendment to an NMS Plan 

filed pursuant to Rule 11Aa3–2(b), and the NMS 

Plan participants have updated the Plan posted on 

the Web site pursuant to Rule 11Aa3–2(b)(8), the 

Commission would not require NMS Plan 

participants to continue posting the amendment on 

the Web site. NMS Plan participants, of course, may 

elect to archive such documents on the Web site.

49The Options Linkage Authority currently posts 

an updated version of the Options Linkage Plan on 

the Options Clearing Corporation’s Web site at 

http://www.optionsclearing.com. Despite the 

delayed effective date for implementation of the 

Web site posting requirements, the Commission 

would encourage NMS plan participants to 

seriously consider Web site posting of NMS Plans, 

and any amendments, as soon as possible to further 

transparency and the other goals described herein.

50BT; Nasdaq; NSCC.

51BT at 1. 52Nasdaq at 2. 53NSCC at 3. 54 Id. 55See Securities Exchange Act Release No. 40761 

(December 8, 1998), 63 FR 70952 (December 22, 

1998). As the options markets already had listing 

standards for single equity options that addressed 

relevant regulatory concerns, the Commission did 

not intend for SROs to comply with Rule 19b–4(e) 

for single equity options. Similarly, the Commission 

did not intend to include traditional issuer warrants 

and traditional convertible securities in the 

definition of ‘‘new derivative securities product.’’

Id. at 70956.

56See Securities Exchange Act Release No. 15838 

(May 18, 1979), 44 FR 30924 (May 29, 1979). 57 Id.

requirement to update Web site rule text 

will run from the business day that the 

SRO receives an electronic notification 

via EFFS from the Commission, not the 

date of the Commission order or notice 

of proposed rule change filed pursuant 

to section 19(b)(3)(A) of the Act. To 

accommodate the systems changes 

necessary to commence electronic 

notification to the SROs through EFFS, 

however, the Commission is delaying 

implementation of this requirement 

until May 9, 2005.

D. Electronic Posting of National Market 

System Plans 

In the Proposing Release, the 

Commission requested comment on 

whether plan administrators for each of 

the seven NMS Plans 39 should post on 

their Web sites or on a separate Plan 

Web site a current version of the NMS 

Plans, as well as proposed amendments 

to these Plans within the one-businessday timeframe proposed for SROs.

The Commission received five 

comments on this issue.40 All of the 

commenters supported the general idea 

of making the NMS Plans available on 

public Web sites,41 whether it is through 

the Plan administrator,42 the 

Commission’s Web site,43 or through 

hyperlinks from SRO Web sites to a 

central Web site where NMS Plan 

information will be maintained.44 While 

supporting the concept of Web posting 

of NMS Plans, two commenters 

expressed concerns about the applicable 

timeframe for updating on-line NMS 

Plan information and the need for 

flexibility to accommodate unusual 

circumstances.45

The Commission has decided to adopt 

a rule that will require each participant 

in an effective NMS Plan to ensure that 

a current and complete version of the 

Plan is posted on a Plan Web site or on 

a Web site designated by Plan 

participants within two business days 

after notification by the Commission of 

effectiveness of such Plan. Each 

participant in any effective NMS Plan 

also will be required to ensure that the 

Web site is updated to reflect 

amendments to such Plan no later than 

two business days after the Plan 

participants have been notified by the 

Commission of its approval of a 

proposed amendment pursuant to Rule 

11Aa3–2(c) of the Act.46 If the 

amendment is not effective for a certain 

period, the Plan participants will be 

required to clearly indicate the effective 

date in the relevant text of the Plan. The 

Plan participants will also be required 

to post any proposed amendments filed 

pursuant to Rule 11Aa3–2(b) of the 

Act 47 on a Plan Web site or a designated 

Web site within two business days after 

the filing of the proposed amendments 

with the Commission.48 The Plan 

participants will be required to remove 

from the Web site within two business 

days any proposed amendment that they 

determine to withdraw. Each Plan 

participant will be required to provide 

a link to the Web site with the current 

version of the Plan. The Commission, 

however, is delaying implementation of 

these requirements until May 9, 2005, to 

allow Plan participants to make 

arrangements for proper compliance 

with these provisions.49

E. Amendments to Rule 19b–4 

The Commission received no 

comments on the proposed amendment 

to Rule 19b–4(e) and is adopting it as 

proposed. Rule 19b–4(e) establishes the 

rule filing requirements for ‘‘new 

derivative securities products.’’ The 

amendment clarifies that the term ‘‘new 

derivative securities product’’ does not 

include a single equity option or a 

security futures product. Regarding the 

proposed amendment clarifying that fee 

changes applicable to non-members and 

non-participants must be filed under 

section 19(b)(2) of the Act and not 

section 19(b)(3)(A)(ii), the Commission 

received three comments.50 One 

commenter expressed support for the 

amendment, stating the clarification is 

important because the rationale for 

automatically effective fees (that SRO 

members would already have had an 

opportunity to review and pass on fee 

changes before they were filed with the 

Commission) does not apply to fees 

assessed on non-members.51 One 

commenter stated the proposed 

amendment is inconsistent with the 

plain meaning of the Act, which makes 

no distinction between members and 

non-members.52 Another commenter 

said the Commission failed to provide 

any rationale for the proposed 

amendment and that there are certain 

fees for which there is no reason to 

require Commission approval.53 The 

commenter cites (1) fees charged to nonparticipants for services available to 

participants at the same price; (2) fees 

charged to non-participants for 

compilations of information available 

from other sources; and (3) fees charged 

to non-participants for services not 

incidental to its business (e.g., rent for 

unused space) as examples.54

The Commission is adopting as 

proposed these amendments to clarify 

Rule 19b–4 and reflect current practice. 

First, the Commission is amending Rule 

19b–4(e), which addresses rule filing 

requirements applicable to ‘‘new 

derivative securities products,’’ to 

clarify that that term does not include 

a single equity option or a security 

futures product.55 Second, in 1979, the 

Commission stated that it would require 

notice and comment before a proposed 

rule change becomes operative that 

establishes or charges a due, fee, or 

other charge applicable to non-members 

of, or non-participants in an SRO 

because ‘‘[n]on-members or nonparticipants do not have a direct voice 

in the selection of the governing body of 

the self-regulatory organization 

proposing the rule change or the 

administration of the organization’s 

affairs.’’ 56 As the Commission 

explained, ‘‘the first opportunity [of 

non-members and non-participants] to 

comment generally occurs only after the 

proposed rule change has become 

effective under section 

19(b)(3)(A)(ii).’’ 57 The Commission 

wants to assure that these persons have

Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 60293

58See Securities Exchange Act Release No. 35123 

(December 20, 1994), 59 FR 66692 (December 28, 

1994). (‘‘[A]s a matter of general policy, an SRO 

proposed rule change that establishes or changes a 

due, fee or other charge applicable to a non-member 

or non-participant must be filed under Section 

19(b)(2) for full notice and comment.’’ Id. at 66697; 

see also Securities Exchange Act Release No. 17258 

(October 30, 1980), 45 FR 73906 (November 7, 1980) 

(footnote 40). The terms ‘‘member’’ and 

‘‘participant’’ are defined in section 3(a)(3)(A) and 

section 3(a)(24), respectively, of the Act.

59 17 CFR 232.101.

60 17 CFR 249.25.

61 44 U.S.C. 3501 et seq.

62See 44 U.S.C. 3512(a).

63See Proposing Release, 69 FR 17864, 17870 

(April 5, 2004). 64See NASD and CHX Letters. 65See NASD Letter, p. 9. 66See Amex, CBOE, CHX, ISE, NASD, Nasdaq, 

NFA, and OCC Letters.

a meaningful opportunity to comment 

before the effective date of the proposed 

rule change, even when member or 

participant fees are equivalent or are for 

items the SRO views as incidental or 

available from other sources. The 

changes to Rule 19b–4(f)(2) codify the 

Commission’s previously stated position 

that a proposed fee change applicable to 

non-members and non-participants 

must be filed under section 19(b)(2) of 

the Act for full notice and comment.58

F. Technical Amendments to Regulation 

S–T

Regulation S–T59 currently states that 

all Exchange Act filings, except for 

Form 25,60 must be submitted in paper 

format. The Commission is adopting as 

proposed a technical amendment to 

Regulation S–T to reflect that the Form 

19b–4 will be filed electronically.

III. Paperwork Reduction Act 

Rule 19b–4 and Form 19b–4 contain 

‘‘collection of information 

requirements’’ within the meaning of 

the Paperwork Reduction Act of 1995.61

Accordingly, the Commission submitted 

the information to the Office of 

Management and Budget (‘‘OMB’’) for 

review in accordance with 44 U.S.C. 

3507 and 5 CFR 1320.11. OMB 

approved the new collection of 

information titled ‘‘Rule 19b–4 Filings 

with Respect to Proposed Rule Changes 

by Self-Regulatory Organizations’’ (OMB 

Control Nos. 3235–0045). OMB also 

approved the collection of information 

titled ‘‘Rule 19b–4(e) under the 

Securities Exchange Act of 1934’’ (OMB 

Control No. 3235–0504). Compliance 

with Rule 19b–4 and Form 19b–4 is 

mandatory.62 An agency may not 

conduct or sponsor, and a person is not 

required to respond to, a collection of 

information unless it displays a 

currently valid control number. Any 

information filed with the Commission 

will be made publicly available.

In the Proposing Release, the 

Commission solicited comments on the 

collection of information 

requirements.63 NASD and CHX 

specifically addressed the Commission’s 

burden estimates made in the PRA 

portion of the Proposing Release.64 For 

example, NASD stated that the 

Commission underestimated the time it 

would take to complete an average rule 

filing.65 Several commenters expressed 

concern that the implementation of the 

requirement to post proposed rule 

changes the next business day following 

filing the Form 19b–4 with the 

Commission and an updated version of 

their own rules on their Web site, 

updated the business day following 

Commission approval (or Commission 

notice of immediately effective filings) 

would be unduly burdensome.66

Commenters stated similar concerns 

about the Web site posting of proposed 

amendments to NMS Plans and updated 

versions of NMS Plans. The 

Commission is making certain 

adjustments to its initial burden 

estimate, discussed below, taking into 

account these comments and concerns 

discussed by commenters.

A. Summary of Collection of 

Information 

Rule 19b–4 currently requires an SRO 

seeking Commission approval for a 

proposed rule change to provide the 

information stipulated in Form 19b–4. 

Form 19b–4 currently calls for a 

description of: the terms of a proposed 

rule change; the proposed rule change’s 

impact on various market segments; and 

the relationship between the proposed 

rule change and the SRO’s existing 

rules. Form 19b–4 also currently calls 

for an accurate statement of the 

authority and statutory basis for, and 

purpose of, the proposed rule change; 

the proposal’s impact on competition; 

and a summary of any written 

comments received by the SRO from 

SRO members or others. The 

amendments do not change the 

information currently required by Rule 

19b–4 or Form 19b–4; the amendments 

only require that such information be 

submitted electronically. 

The amendments to Rule 19b–4, 

however, require Web site posting of all 

proposed rule changes, and any 

amendments thereto. In addition, the 

amendments require SROs to post a 

current and complete set of their rules 

on their Web sites. Several SROs 

currently post a set of their own rules 

and selected proposed rule changes that 

they have submitted to the Commission. 

The amendments to Rule 11Aa3–2(b) 

similarly require Web site posting of 

proposed amendments and current and 

complete NMS Plans. 

B. Use of Information 

The information provided via 

External Account User Administration 

Form (‘‘EAUF’’), as required by the 

amendments to Form 19b–4, will be 

used by the Commission to verify the 

identity of the SRO individual and 

provide such individual access to the 

EFFS, the secure Commission Web site 

for filing of the Form 19b–4. The 

proposed rule change posted by SROs 

on their Web sites will be able to be 

viewed by the general public, SRO 

members, competing SROs, other 

market participants, and Commission 

staff. The information provided on the 

SRO Web sites will enable interested 

parties to more easily access SRO rules 

and rule filings, which will facilitate 

public comment on proposed SRO rules. 

Similarly, plan participants and other 

interested parties will be able to more 

easily access the text of NMS Plans and 

proposed amendments to such plans. In 

addition, the Commission believes that 

SRO staff, members, industry 

participants, and Commission staff will 

utilize the accurate and current version 

of SRO rules that are posted on the SRO 

Web site and current and accurate 

versions of NMS Plans that are posted 

on a public Web site to facilitate 

compliance with such rules and plans. 

C. Respondents 

There are currently 27 SROs and 7 

NMS Plans subject to the collection of 

information. In fiscal year 2003, these 

SRO respondents filed 769 rule change 

proposals and 510 amendments to those 

proposed rule change proposals, for a 

total of 1,279 filings that are subject to 

the current collection of information. In 

2003, 705 proposed rule changes 

ultimately became effective. In 2003, 12 

amendments to NMS Plans were filed 

and became effective. 

D. Total Annual Reporting and 

Recordkeeping Burden 

(1) Background 

The proposed amendments to Rule 

19b–4 and Form 19b–4 are designed to 

modernize the SRO rule filing process 

and to make the process more efficient 

by conserving both SRO and 

Commission resources. As amended, 

Rule 19b–4 and Form 19b–4 require 

SROs to electronically file their 

proposed rule changes. Form 19b–4 is 

revised to accommodate electronic 

submission. The proposed amendments 

to Rule 19b–4 will also require the SROs

60294 Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 

67See http://www.verisign.com/support/tlc/per/

clientHelp/help/index.htm for information on the 

digital ID that the Commission will employ.

68See NASD Letter at 6.

69See NASD Letter p. 6. 70Telephone conference between Stephanie 

Dumont, Vice President and Associate General 

Counsel, NASD, with Florence Harmon, Senior 

Special Counsel, Commission, on September 16, 

2004.

71The SROs’ one-hour time savings would result 

from the elimination of tasks such as making 

multiple copies of the Form 19b–4 and 

amendments, arranging for couriers, and making 

follow-up telephone calls to ensure Commission 

receipt.

72See CHX Letter, page 4.

to post on their Web sites any proposed 

rule changes, and amendments, 

submitted to the Commission within 

two business days of filing with the 

Commission. In addition, the 

amendments to Rule 19b–4 require 

SROs to post a current and complete set 

of their rules on their Web sites. The 

Commission is proposing similar Web 

site posting requirements for NMS Plans 

and proposed amendments thereto.

(2) Rule 19b–4 and Form 19b–4

The Commission does not expect that 

the amendments to Rule 19b–4 and 

Form 19b–4 relating to electronic filing 

of proposed rule changes and 

amendments will impose any material 

upfront costs on SROs. The technology 

for electronic filing will be web-based; 

therefore, the SROs should not have any 

material upfront technology 

expenditures for electronic filing 

because all SROs currently have access 

to the Internet. 

However, each SRO will be required 

to obtain a digital ID from a certificating 

authority. The Commission staff 

estimates the upfront and annual cost of 

the ID to be $15 for each SRO.67 One 

commenter observed that the 

Commission’s estimate of two digital 

IDs per SRO underrepresented the 

actual number of such IDs that the 

commenter, an SRO, anticipates that it 

would have to purchase.68 Instead, the 

commenter stated that it expects to 

obtain between five and ten digital IDs. 

The Commission notes that the 

commenter, the NASD, has historically 

filed more proposed rule changes 

pursuant to Rule 19b-4 than any other 

SRO. For example, the NASD filed 202 

proposed rule changes in 2003, more 

than double the number of any other 

SRO. Although the Commission believes 

the NASD’s expectations with respect to 

the number of authorized digital ID 

holders may be uniquely high, the 

Commission believes that it is 

appropriate to adjust the average 

number of IDs per SRO to five digital 

IDs per SRO. Accordingly, the annual 

cost of the ID for all SROs will be $2,025 

(27 SROs × $15 × 5).

In addition, the Commission believes 

that SROs could incur some costs 

associated with training their personnel 

about the procedures for submitting 

proposed rule changes in electronic 

format and submission of the 

information via EFFS. However, the 

Commission believes that such costs 

will be one-time costs and relatively 

insubstantial since the SROs are already 

familiar with the information required 

in filing a proposed rule change with 

the Commission and will only be 

required to submit the same information 

electronically under this proposal. The 

Commission estimates that each SRO 

will spend approximately two hours 

training each staff member who will use 

the EFFS to submit the proposed rule 

changes electronically. Accordingly, the 

Commission estimates that the upfront 

cost of training SRO staff members to 

use EFFS will be 270 hours (27 SROs ×

2 hours × 5 staff members). 

An SRO proposed rule change is 

generally filed with the Commission 

after an SRO staff member has obtained 

approval by its Board. The time required 

to complete a filing varies significantly 

and is difficult to separate from the time 

an SRO spends in developing internally 

the proposed rule change. In the 

Proposing Release, the Commission 

stated that several SROs estimated 35 

hours to be the amount of time required 

to complete an average rule filing using 

present Form 19b–4. This figure 

includes an estimated 25 hours of inhouse legal work and ten hours of 

clerical work. The Commission also 

stated that the amount of time required 

to prepare amendments varies because 

some amendments are comprehensive, 

while other amendments are submitted 

in the form of a one-page letter. The 

Commission staff estimated that, under 

current rules, four hours is the amount 

of time required to prepare an 

amendment to a proposed rule change. 

This figure included an estimated two 

hours of in-house legal work and two 

hours of clerical work. 

One commenter, NASD, noted that 

the Commission significantly 

underestimated the time it took NASD 

to complete an average filing or 

amendment.69 The NASD subsequently 

stated that 20 of its 2003 proposed rule 

filings were complex and required 130 

hours on the average to prepare.70 Given 

this estimate, Commission staff also 

estimated that 13 of other SRO proposed 

rule filings in 2003 were similarly 

complex and required 130 hours on 

average to prepare. Commission staff 

also spoke with several other SROs 

subsequent to the Proposing Release. 

Although there was no consensus as to 

the typical amount of time expended in 

a proposed rule change, most of the 

other SROs, with which the 

Commission staff spoke, agreed that the 

Commission’s 35 hour estimate 

provided in the Proposing Release was 

reasonable and accurately reflected their 

experiences. Accordingly, the 

Commission will use the same 35 hour 

estimate for preparation of all SRO 

proposed rule changes, except the 

Commission will use an estimate of 130 

hours for the 33 complex proposed 

rules.

The Commission expects that an 

electronic form will reduce by one hour 

the amount of SRO clerical time 

required to prepare the average filing 

and amendment. Following the 

effectiveness of the proposed electronic 

filing, the Commission staff estimates 

that 34 hours is the amount of time that 

will be required to complete an average 

rule filing, 129 hours is the amount of 

time required to complete a complex 

rule filing, and three hours is the 

amount of time required to complete an 

average amendment. These figures 

reflect the one-hour in savings in 

clerical hours that will result from the 

use of an electronic form for both the 

rule filings and the amendments.71 The 

Commission staff estimates that the 

reporting burden for filing rule change 

proposals and amendments with the 

Commission under the proposed 

amendments will be 30,811 hours (736 

rule change proposals × 34 hours + 33 

complex rule proposal x 129 hours + 

510 amendments × 3 hours). Thus, on 

average, the reporting burden for filing 

proposed rule changes is 38 hours, 

while the reporting burden for filing 

amendments is 3 hours.

(3) Posting of SRO Rules and Proposed 

Rule Changes on SRO Web Sites. 

(a) SRO Rule Text 

The Commission noted in the 

Proposing Release that most of the SROs 

currently post some or all of the text of 

their rules on their Web sites. Some 

SROs currently rely on CCH, 

Incorporated (‘‘CCH’’) to maintain a 

current version of their rules; others 

maintain the rules themselves on their 

Web site; while the remaining SROs do 

not provide their rules on their Web 

site. One commenter that currently does 

not post its rules on its Web site 

observed that, after discussing the issue 

with CCH, CCH might offer web-hosting 

arrangements for an annual cost of 

approximately $45,000.72 The 

commenter anticipated that doing the

Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 60295

73NASD Letter, page 9.

74Amex Letter 1–2, CBOE 3–4, CHX 3–4, ISE 2, 

NFA 3, OCC 2–3, and Nasdaq 2.

75The National Stock Exchange, Inc. (f/k/a 

Cincinnati Stock Exchange, Inc.), Chicago Stock 

Exchange, Inc., Boston Stock Exchange Clearing 

Corporation, INET Futures Exchange, LLC, and 

Pacific Clearing Corporation do not appear to post 

their rules on their Web sites. The New York Stock 

Exchange does not have its rules on its Web site; 

however, the New York Stock Exchange does post 

its Listed Company Manual on its Web site.

76 15 U.S.C. 78f(b)(1).

77 15 U.S.C. 78o–3(b)(2).

78 15 U.S.C. 78o–4.

79 15 U.S.C. 78q–1.

80See NASD Letter, p. 8.

81The NASD suggested that the estimate should 

have been four hours instead of 0.5 hours.

82This number includes SRO proposed rule 

changes that the Commission notices pursuant to 

section 19(b)(3)(A) of the Act, which are effectiveupon-filing, and SRO proposed rule changes that 

the Commission notices and accelerates approval in 

the same document pursuant to section 19(b)(2) of 

the Act, along with notices issued by the 

Commission pursuant to section 19(b)(2) of the Act.

work internally would be more costeffective.

In the Proposing Release, the 

Commission staff estimated that an 

SRO, on average, would take two hours 

to update the rules published on the 

SRO’s Web site when the SRO’s 

proposed rule becomes effective. One 

commenter stated that it believed that 

the Commission’s two-hour estimate did 

not accurately reflect the amount of time 

necessary for an SRO to incorporate 

recently approved or effective-uponfiling rule changes into its online 

manual, explaining that the process of 

reviewing the final rule text and 

communication with the publishing 

vendor can take ten or more business 

days.73 Several other commenters 

implied that their Web site update of 

their SRO rules typically takes more 

than two hours by explaining that the 

process occurs over a series of days 

following Commission approval of a 

recent proposed rule change.74

The Commission notes that SROs 

need not use CCH to maintain a correct 

version of their rules on their Web sites. 

For example, ISE posts its rules on its 

Web site in the form of a PDF file, 

which the ISE can easily change when 

amending its rules. In response to the 

commenters’ concerns regarding the 

Commission’s two-hour estimate of the 

time required to update an SRO’s Web 

site after the proposed rule change 

becomes effective, the Commission is 

raising its estimate from two hours to 

four hours as the amount of time 

necessary to update an SRO-maintained 

document containing the SRO’s rules 

and post it on the SRO’s Web site. 

Therefore, each time the Commission 

approves an SRO rule change or notices 

an effective-upon-filing rule change 

(total of 705 rules in fiscal year 2003), 

the Commission staff estimates that the 

reporting burden for updating the 

posted SRO rules on the SRO Web site 

will be 2,820 hours (705 SRO 

Commission approved or non-abrogated 

rules × 4 hours). 

The Commission notes that only 6 of 

the 27 SROs do not currently post their 

rules on their Web site.75 In addition, 

the Commission notes that SROs are 

required by sections 6(b)(1),76

15A(b)(2),77 15B,78 and 17A 79 of the Act 

to enforce compliance with their rules. 

The Commission believes that an SRO 

must have a complete, updated version 

of its rules in order to enforce them. The 

Commission does not believe the SROs 

that currently do not post their rules on 

their Web sites will incur material costs 

in simply posting this information on 

their Web sites. The Commission staff 

estimates that four hours will be the 

amount of time required to post an 

SRO’s current rules on its Web site. 

Accordingly, the Commission staff 

estimates that the total reporting burden 

for initially posting current rules on the 

SROs’ Web sites will be 24 hours (6 

SROs that do not already post their rules 

x 4 hours) because each SRO should 

have a current version of its rules 

available internally for posting on its 

Web site.

(b) Proposed Rule Changes

In the Proposing Release, the 

Commission stated that it believed that 

the SROs could incur nominal costs in 

being required to post on their Web site 

their proposed rules, and amendments 

thereto, no later than the next business 

day after filing with the Commission. In 

the Proposing Release, the Commission 

staff estimated that 30 minutes is the 

amount of time that will be required to 

post a proposed rule on an SRO’s Web 

site and that 30 minutes is the amount 

of time that will be required to post an 

amendment on an SRO’s Web site. The 

Commission received one comment on 

the subject of the Commission’s 30-

minute estimate.80 The commenter, the 

NASD, suggested that the estimate was 

too low,81 given the fact that the NASD’s 

Communication Department must, each 

time they post a proposed rule change 

to their Web site, convert the file to PDF 

format, copy it to a development server 

to be processed, link it to the NASD’s 

Rule Filing web page, return the PDF 

file to the department within the NASD 

that is responsible for the filing to 

ensure that no errors occurred in the 

conversion to the PDF format, and then 

wait for it to be returned so that the 

Department can activate the web link. 

Although the Commission believes that 

most of the procedures that the NASD 

describes are mechanical functions that 

should not take as long as the NASD 

estimates, the Commission has no other 

comments or data from which to draw 

to substantiate its belief. Accordingly, 

the Commission is raising its estimate to 

four hours for the amount of time it 

takes for an SRO to post rule change 

proposals and amendments on its Web 

site. The Commission estimates that the 

reporting burden for posting rule change 

proposals and amendments on the SRO 

Web sites will be 5,116 hours (769 rule 

change proposals 82 × 4 hours + 510 

amendments × 4 hours).

(4) Web Site Posting of NMS Plans and 

Proposed Amendments 

The Commission has decided to adopt 

a provision that will require the 

participants in any effective NMS Plan 

to post on a public Web site to be 

designated by the plan participants a 

current version of the plans, as well as 

proposed amendments to these plans, 

within two business days after 

effectiveness of such plan or filing of 

any proposed amendments. Each plan 

participant will be required to provide 

a link to the designated Web site with 

the current version of the plan. The 

Commission is delaying implementation 

of these requirements, to allow plan 

participants to make arrangements for 

compliance with these provisions. 

Commission staff estimates that an 

SRO, on average, will take four hours to 

update its Web site postings of the 

SROs’ rules. One of the participants of 

each of the seven NMS Plans would 

update a public Web site posting of their 

plans when the Commission approves 

plan amendments. In fiscal year 2003, 

the participants in the seven NMS Plans 

filed 12 amendments to the plans. 

Therefore, the Commission estimates 

that the reporting burden for updating 

NMS Plans on the designated NMS Plan 

Web site will be 48 hours (12 NMS Plan 

amendments per year × 4 hours).

The NMS Plan participants will also 

have to post proposed amendments to 

NMS Plans on a public Web site. 

Consistent with its estimate for SRO 

Web site posting of proposed rules, the 

Commission estimates four hours as the 

amount of time for NMS Plan 

participants to post proposed 

amendments on a designated Web site. 

Therefore, the Commission estimates 

that the reporting burden for posting 

proposed rules will be 48 hours (12 

amendments × 4 hours). 

The Commission notes that only one 

of the seven NMS Plans is currently

60296 Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 

83The Options Linkage Authority currently posts 

an updated version of the Options Linkage Plan on 

the Options Clearing Corporation’s Web site at 

http://www.optionsclearing.com.

84SROs may also destroy or otherwise dispose of 

such records at the end of five years according to 

Rule 17a–6 of the Act. 17 CFR 240.17a–6.

85See NASD Letter, p. 3, CHX Letter, p. 2, and 

OCC Letter, p. 3.

86 17 CFR 232.302(b).

87However, consistent with applicable law, 

proposed SRO rule changes containing proprietary 

or otherwise sensitive information may be kept 

confidential and nonpublic, including requests 

submitted pursuant to the protection afforded for 

such information in the Freedom of Information 

Act. 5 U.S.C. 552.

88See NASD, CHX, OCC, Amex, CBOE, CHX, ISE, 

NFA, and Nasdaq Letters.

posted on a public Web site.83 As with 

the posting of SRO rules, the 

Commission’s staff estimates that one 

hour will be the amount of time 

required to post the NMS Plan on the 

designated Web site. NMS Plan 

participants should know the current 

version of their effective NMS Plan 

because Rule 11Aa3–2(b)(1) requires 

filing of the plan and any amendments 

with the Commission. In addition, the 

Commission notes that SRO plan 

participants are required to enforce 

compliance with the terms of the plans 

by their members. Rule 11Aa3–2(d) 

states that each SRO shall comply with 

the terms of any effective NMS Plan of 

which it is a sponsor or a participant. 

Each SRO also shall, absent reasonable 

justification or excuse, enforce 

compliance with any such plan by its 

members and persons associated with 

its members. The Commission believes 

that NMS Plan participants must have a 

complete, updated version of their plans 

in order to enforce them. The 

Commission does not believe the SRO 

participants in NMS Plans will incur 

material costs in simply posting this 

information on a designated Web site. 

The Commission staff estimates that one 

hour will be the amount of time 

required to post the NMS Plan on a 

public Web site. Accordingly, the 

Commission staff estimates that the total 

reporting burden for initially posting 

current NMS Plans on public Web sites 

will be 24 hours (6 NMS Plans × 4 

hours) because each participant in an 

NMS Plan should have a current version 

of the plan available for posting on a 

public Web site.

Thus, the Commission staff estimates 

that the total annual reporting burden 

under the proposed rule will be 38,891 

hours (30,811 hours for filing proposed 

rule changes and amendments + 5,116 

hours for posting proposed rule changes 

and amendments on the SROs’ Web 

sites + 24 hours for initial posting of 

accurate SRO rule text on SRO Web 

sites + 2,820 hours for updating SRO 

final rules on SRO Web sites + 48 hours 

for updating NMS Plans on NMS Plan 

Web sites + 48 hours for posting 

proposed amendments on NMS Plan 

Web sites + 24 hours for initial Web site 

posting of current NMS Plans). 

E. Retention Period of Recordkeeping 

Requirements 

The SROs will be required to retain 

records of the collection of information 

(the manually signed signature page of 

the Form 19b–4) for a period of not less 

than five years, the first two years in an 

easily accessible place, according to the 

current recordkeeping requirements set 

forth in Rule 17a–1 of the Act.84 The 

SRO is required to retain proposed rule 

changes, and any amendments, on its 

Web site until the proposal is either 

approved or disapproved. The SRO is 

also required at all times to maintain an 

accurate and up-to-date copy of all of its 

rules on its Web site. NMS Plan 

participants are subject to similar 

requirements for Web site posting of 

NMS Plans and proposed amendments 

to such plans.

Several commenters suggested that 

the proposed requirement for the SROs 

to maintain the manually signed 

signature page of the Form 19b–4 for at 

least five years, the first two of which 

in an easily accessible place, is 

unnecessary and inconsistent with 

administrative efficiency.85 The 

Commission believes that maintaining 

the physical signature page will enable 

interested parties, including the 

Commission, to access a record of the 

authority under which a particular 

proposed rule change was filed. The 

Commission notes that the retention of 

the physical signature page is an 

existing maintenance requirement for 

SROs. The Commission further notes 

that a similar manual signature 

retention requirement exists for EDGAR 

filers.86

F. Collection of Information is 

Mandatory 

Any collection of information 

pursuant to the proposed amendments 

to Rule 19b–4 and Form 19b–4 to 

require electronic filing with the 

Commission of SRO proposed rule 

changes is a mandatory collection of 

information. Any collection of 

information pursuant to the proposed 

amendments to require Web site posting 

by the SROs of their proposed and final 

rules, and by NMS Plan participants of 

the plans and proposed amendments, is 

also a mandatory collection of 

information.

G. Responses to Collection of 

Information Will Not Be Kept 

Confidential 

Other than information for which an 

SRO requests confidential treatment and 

which may be withheld from the public 

in accordance with the provisions of 5 

U.S.C. 552, the collection of information 

pursuant to the proposed amendments 

to Rule 19b–4 and Form 19b–4 and Rule 

11Aa3–2(b) under the Act is not 

confidential and is publicly available.87

The Commission notes that the posting 

of proposed and final rules on the SRO 

Web site (or the posting of NMS Plans 

and proposed amendments on a public 

Web site) is not information filed with 

the Commission but is information that 

is being made public by the SROs.

IV. Consideration of Costs and Benefits 

In the Proposing Release, the 

Commission identified certain costs and 

benefits associated with the proposed 

amendments to Rule 19b–4 and Form 

19b–4 and requested comments on the 

Commission’s preliminary analysis, as 

well as any costs and benefits not 

previously identified. Specifically, the 

Commission requested commenters to 

address whether the proposed 

amendments requiring electronic filing 

of SRO proposed rule changes, posting 

proposed rule changes on SRO Web 

sites, and posting and maintaining 

current and complete sets of rules on 

SRO Web sites would generate the 

anticipated benefits or impose any 

unanticipated costs on SROs and the 

public. The Commission received nine 

comments relating to the costs and 

benefits of the proposed amendments.88

The Commission also engaged in 

informal discussions with a number of 

SROs following the publication of the 

amendments in the Federal Register. 

After a careful consideration of the 

comments received and the discussions 

held with SROs, the Commission 

believes that the benefits of the 

amendments justify the costs that they 

will impose.

A. Benefits 

The proposed amendments to Rule 

19b–4 and Form 19b–4 are designed to 

modernize the filing, receipt, and 

processing of SRO proposed rule 

changes by making the SRO rule filing 

process more transparent, efficient, and 

cost effective. For instance, the 

Commission believes that electronic 

filings will expedite the submission of 

proposed rule changes by eliminating 

paper delivery and also reduce SROs’

clerical costs. Specifically, the 

Commission staff estimates that it 

currently takes an SRO 10 hours of

Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 60297

89Telephone conference between Katherine 

Simmons, Vice President and Associate General 

Counsel, International Stock Exchange, with 

Florence Harmon, Senior Special Counsel, on 

September 22, 2004.

90One SRO estimated its savings from not having 

to monitor the Commission’s Public Reference 

Room to be over $12,000 per year. Id. 91See NASD Letter, p. 6.

clerical time to prepare an average rule 

filing and 2 hours of clerical time to 

prepare an amendment to an average 

rule filing. The Commission staff 

expects that electronic filings will 

reduce by 1 hour the clerical time 

necessary for such rule filings and 

amendments, saving SROs 1,279 hours 

of clerical time, annually (1 hour × 769 

proposed rule filings + 1 hour × 510 

amendments). Furthermore, SROs 

currently pay the delivery cost of 

submitting multiple paper copies of 

proposed rule changes to the 

Commission. The Commission staff 

estimates that electronic filing will save 

SROs $19,185, annually, in delivery cost 

($15 × 769 proposed rule filings + $15 

× 510 amendments). The Commission 

believes that certain SROs will also save 

the expense of monitoring the 

Commission’s Public Reference Room 

for competitors’ proposed rule change, 

which one SRO estimated at $12,000 per 

year.89 Accordingly, the Commission 

staff estimates that the equity and 

options exchanges incur such costs and 

will save approximately $108,000 

annually (8 SROs × $96,000) as a result 

of obviating the need for such 

monitoring.

The Commission also expects that the 

amendments to Rule 19b–4 and Form 

19b–4 will help conserve Commission 

resources. With electronic filings, the 

Commission staff will no longer 

manually process the internal receipt 

and distribution of SRO rule filings. The 

Commission staff estimates that 

electronic filings would save the 

Commission 1 hour of clerical time for 

each proposed rule change and 

amendment. Annually, this will be a 

saving of 1,279 hours of the 

Commission’s clerical time (1 hour ×

769 proposed rule filings + 1 hour × 510 

amendments). Moreover, the 

Commission believes that the electronic 

filing system provides certainty to SROs 

that proposed rule changes have been 

received because SROs will be able to 

confirm on EFFS that rule filings have 

been received. Lastly, the Commission 

anticipates that integrating the 

electronic filing technology with SRTS 

will enhance the Commission’s ability 

to monitor and process rule filings by 

automatically capturing pertinent 

information about the rule changes in 

SRTS. 

The Commission believes that there 

are certain benefits to requiring SROs to 

post proposed rule changes on SRO Web 

sites no later than two business days 

after filing with the Commission. For 

example, online accessibility of 

proposed SRO rule changes will 

enhance the transparency of the rule 

filing process. Also, the posting 

requirement will facilitate interested 

parties’ ability to comment on proposed 

rule changes. Further, the Commission 

anticipates that the posting requirement 

will reduce the burden placed on SROs 

and the Commission of having to 

provide information about rule filings to 

interested parties. The Commission also 

believes that posting proposed rule 

changes will save SRO resources 

currently being used to monitor the 

Commission’s Public Reference Room 

for competitors’ filings.90

The Commission believes that there 

are a number of benefits to requiring 

SROs to post and maintain a current and 

complete set of rules on their Web sites. 

The Commission believes that this 

requirement will facilitate prompt 

availability of SRO rule texts following 

the approval of proposed rule changes 

pursuant to Rule 19b–4. The 

Commission also believes that the 

requirement will enhance compliance 

with SRO rules by eliminating 

confusion among interested parties 

regarding the accuracy of SRO rule 

texts. Finally, the Commission 

anticipates that online availability of a 

current and complete set of SRO rule 

texts should promote competition 

among SROs by providing quick and 

cost-efficient access to competitors’

rules. 

The Commission also believes that 

there are a number of benefits to 

requiring the posting on a public Web 

site designated by the participants of the 

current and complete text of NMS Plans 

and any proposed amendments to such 

plans. The Commission believes that 

this requirement will facilitate prompt 

availability of NMS Plans, or any 

proposed amendment to the plans. The 

Commission also believes that the 

requirement will enhance compliance 

with NMS Plans by eliminating 

confusion among plan participants 

regarding the requirements of the plans.

B. Costs 

The Commission staff estimates that 

there will be a total annual paperwork 

reporting burden of 38,891 hours under 

the amended Rule 19b–4 and Form 19b–

4. As discussed in Section IV (A), supra, 

the Commission believes that the 

amendments will, on aggregate, reduce 

costs related to the submission of SRO 

proposed rule changes. Because all 

SROs currently have access to the 

Internet, the Commission anticipates 

that SROs will not have significant 

technology expenditures for electronic 

filings. Furthermore, costs associated 

with paper filings will not be incurred 

with electronic filings. Currently, most 

information submitted by SROs is 

currently submitted to the Commission 

in multiple paper copies. The 

Commission believes that the 

amendments to Rule 19b–4 and Form 

19b–4, by requiring SROs to submit 

proposed rule changes electronically, 

will actually reduce SRO costs. 

The Commission, however, 

anticipates that SROs will incur some 

cost in training their personnel to 

submit EAUF and proposed rule 

changes electronically. Specifically, the 

Commission staff estimates that the 

reporting burden for filing rule change 

proposals and amendments with the 

Commission under the proposed 

amendments will be 30,811 hours (736 

rule change proposals × 34 hours + 33 

complex rule proposals × 129 hours + 

510 amendments × 3 hours). In addition, 

the Commission staff estimates that the 

upfront burden of training SRO staff 

members for these purposes will be 270 

hours (27 SROs × 2 hours × 5 staff 

members). 

The Commission also expects that 

SROs will incur some costs pursuant to 

the signature requirements of the 

amendments. For example, SROs will 

incur some minimal costs ($15 per ID 

per year) associated with purchasing a 

digital ID for each duly authorized 

electronic signatory. In the Proposing 

Release, the Commission staff estimated 

that each SRO will purchase 2 digital 

IDs. However, one commenter asserted 

that it would likely seek 5 to 10 digital 

IDs for its staff.91 No other commenters 

sought to dispute the Commission’s 

estimate on the digital IDs required by 

each SRO. Due in part to the large size 

of the commenter’s staff and the number 

of its annual proposed rule changes and 

amendments, the Commission 

acknowledges this commenter’s need for 

more than 2 digital IDs but believes that 

the commenter’s estimate is nonetheless 

unusually high. Nevertheless, the 

Commission believes that it is 

appropriate to adjust the average 

number of IDs per SRO to 5 digital IDs. 

Accordingly, the annual cost of the ID 

for all SROs will be $2,025 (27 SROs ×

$15 × 5).

Under the amendments, SROs are 

required to print the Form 19b–4 

signature block, sign proposed rule 

changes, and retain the manual 

signature for not less than five years.

60298 Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 

92See NASD Letter, p. 8. The commenter 

suggested that the estimate should be 4 instead of 

0.5 hours.

93See CHX Letter, p. 4.

94 15 U.S.C. 78f(b)(1).

95 15 U.S.C. 78o–3(b)(2).

96 15 U.S.C. 78o–4.

97 15 U.S.C. 78q–1.

98See NASD Letter, pp. 8–9.

99 Id.

100See Amex Letter, pp. 1–2, CBOE Letter, pp. 3–

4, CHX Letter, pp. 3–4, ISE Letter, p. 2, NFA Letter, 

p. 3, OCC Letter, pp. 2–3, and Nasdaq Letter, p. 2.

101The Options Linkage Authority currently posts 

an updated version of the Options Linkage Plan on 

the Options Clearing Corporation’s Web site at 

http://www.optionsclearing.com.

102 15 U.S.C. 78c(f).

103 15 U.S.C. 78w(a)(2).

The Commission anticipates that there 

will be no additional cost associated 

with such recordkeeping, as SROs are 

already required to retain the Form 19b–

4 for not less than five years. 

Accordingly, the Commission believes 

that this requirement would not impose 

any new burden on SROs. 

The Commission believes that the 

requirement that SROs post proposed 

rule changes on public Web sites will 

impose some but not substantial costs 

on most SROs. In the Proposing Release, 

the Commission staff estimated that 

SROs will need 30 minutes to post a 

proposed rule or an amendment on their 

Web sites. The Commission, however, 

has received one comment asserting that 

accurately processing and posting a 

proposed rule on its Web site requires 

more time than estimated.92 The 

Commission now believes that it takes 

an additional 3.5 hours to ensure that 

the proposed rule is accurately posted. 

Accordingly, the Commission estimates 

that the burden for posting rule change 

proposals and amendments on SRO 

Web sites would be 5,116 hours (4 hours 

× 769 proposed rule changes + 4 hours 

× 510 amendments).

The same commenter observed that 

staff resources are necessary to properly 

post proposed rule changes but did not 

quantify the cost. The commenter also 

noted, however, that the benefits of 

requiring SROs to post their rule filings 

on their public Web sites far outweigh 

the related costs. 

The Commission observed in the 

Proposing Release that most SROs 

currently post some, if not all, of their 

rule text on their respective Web sites or 

rely on CCH to maintain such 

information. SROs may incur a cost in 

expediting prompt publication of rule 

changes on CCH or maintaining current 

versions on SRO Web sites. For those 

who do not currently maintain their 

rules online, as one commenter 

observed, the annual cost could be as 

high as $45,000.93 The Commission, 

however, notes that SROs are required 

by sections 6(b)(1),94 15A(b)(2),95 15B,96

and 17A,97 of the Act to enforce 

compliance with their respective rules. 

Therefore, at all times, each SRO should 

maintain a current and complete set of 

its rules to facilitate compliance with 

this requirement. Accordingly, the 

Commission does not believe that SROs 

would incur substantial costs in simply 

posting this information on their Web 

sites.

In the Proposing Release, the 

Commission staff also estimated that an 

SRO will take an average of 2 hours to 

update its Web site to accurately reflect 

an approved or effective-upon-filing 

rule change. One commenter, however, 

has asserted that this estimate does not 

accurately reflect the amount of time 

necessary for an SRO to incorporate 

such change.98 The commenter 

observed that ensuring the accuracy of 

the final rule text and communicating 

the changes to the publishing vendor 

could take more than ten business 

days.99 Other commenters have also 

suggested that it takes more than 2 

hours to process the proposed rule 

changes without specifying a more 

accurate estimate.100 Accordingly, the 

Commission is raising its estimate from 

2 hours to 4 hours, consistent with the 

estimate for Web site posting of 

proposed rule changes and their 

amendments. Therefore, the 

Commission staff estimates that the 

burden for updating the posted SRO 

rules on the SRO Web sites will be 2,820 

hours (705 SRO Commission approved 

or non-abrogated rules × 4 hours).

The Commission is also adopting the 

amendments that require NMS Plan 

participants to post on a public Web site 

a current version of the plans, as well 

as proposed amendments to these plans, 

within the same time periods for SROs. 

Commenters generally supported 

making NMS Plans, as well as proposed 

amendments, available on a public Web 

site. Some commenters, however, were 

concerned with the next business day 

timeframe for updating on-line rules 

and posting amendments; which the 

Commission has revised to a two 

business day posting requirement for 

both SROs and NMS plan participants. 

NMS Plan participants may incur a 

cost in prompt publication of NMS 

Plans. As with the posting of SRO rules, 

the Commissions staff estimates that 

four hours will be the amount of time 

required to post the NMS Plan on the 

designated Web site. NMS Plan 

participants should know the current 

version of their effective NMS Plan 

because Rule 11Aa3–2(b)(1) requires 

filing of the plan and any proposed 

amendments with the Commission. In 

addition, the Commission notes that 

SRO plan participants are required to 

enforce compliance with the terms of 

the plans by their members pursuant to 

Rule 11Aa3–2(d). The Commission 

believes that NMS Plan participants 

must have a complete, updated version 

of their plans in order to enforce 

them.101 Accordingly, the Commission 

does not believe that NMS Plan 

participants would incur substantial 

costs in simply posting this information 

on a public Web site and estimates the 

burden hours for this requirement to be 

24 hours (6 NMS Plans × 4 hour).

The participants in the seven NMS 

Plans will also be required to update 

NMS Plans within two business days 

after notification of Commission 

approval of proposed amendments. 

Consistent with the timeframe for SROs, 

the Commission estimates that it will 

take four hours for participants to 

update NMS Plans on the designated 

NMS Plan Web site and that the burden 

hours would be 48 hours (12 NMS Plans 

× 4 hours). NMS Plan participants will 

also have to post proposed amendments 

to NMS Plans on a public Web site. As 

with its estimate for SRO Web site 

posting of proposed rules, the 

Commission estimates four hours as the 

amount of time for NMS Plan 

participants to post proposed 

amendments on a designated Web site 

and estimates the burden hours to be 48 

hours (12 amendments × 4 hours). The 

Commission does not believe that NMS 

Plan participants will incur material 

costs for posting this information on a 

public Web site. 

V. Consideration of the Burden on 

Competition, Promotion of Efficiency, 

and Capital Formation 

Section 3(f) of the Act 102 requires the 

Commission, whenever it engages in 

rulemaking and is required to consider 

or determine whether an action is 

necessary or appropriate in the public 

interest, to consider whether the action 

will promote efficiency, competition, 

and capital formation. In addition, 

section 23(a)(2) of the Act 103 requires 

the Commission, when promulgating 

rules under the Act, to consider the 

impact any such rules would have on 

competition. Section 23(a)(2) further 

provides that the Commission may not 

adopt a rule that would impose a 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act.

In the Proposing Release, the 

Commission considered how the 

proposed amendments would impact 

competition among SROs, and whether

Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 60299

104See NFA Letter, p. 2.

105See CHX Letter, p. 2.

106See CHX Letter, p. 2.

107See CHX Letter, p. 2.

108See CHX Letter, p. 2.

109 5 U.S.C. 605(b).

110 69 FR 17864, 17871–72.

it would promote efficiency and capital 

formation. The Commission solicited 

comment on whether, if adopted, the 

proposed amendments would impose a 

burden on competition. The 

Commission also requested comment on 

whether, if adopted, the proposed 

amendments would promote efficiency, 

competition and capital formation. The 

Commission requested commenters to 

provide empirical data to support for 

their views. 

The proposed amendments to Rule 

19b–4 and Form 19b–4 are intended to 

modernize the receipt and review of 

SRO proposed rule changes and to make 

the SRO rule filing process more 

efficient by conserving both SRO and 

Commission resources. They also are 

intended to improve the transparency of 

the SRO rule filing process and facilitate 

access to current and complete sets of 

SRO rules. The amendments to Rule 

11Aa3–2(b), regarding Web site posting 

of NMS Plans and proposed 

amendments thereto, seek to achieve 

similar goals for plan participants and 

Commission staff. The Commission 

believes that the electronic rule filing 

process will enhance the efficiency of 

the filing of proposed rule changes 

under Rule 19b–4. The Commission 

further believes that the Web site 

posting of SRO rule filings will promote 

competition among SROs because they 

will be able to determine the proposed 

rules of their competitors more easily. 

Because the proposal does not impact a 

significant number of businesses or 

investors, the Commission believes the 

proposal will have minimal impact on 

capital formation.

The Commission believes that the 

proposed amendments to Rule 19b–4 

and Form 19b–4 will significantly 

increase the efficiency of the process of 

filing proposed rule changes pursuant to 

Rule 19b–4. As a result of the new 

requirement to filing proposed rule 

changes electronically, the Commission 

anticipates that SROs will save time and 

resources currently devoted to 

corresponding under a paper-based 

system. As discussed in further detailed 

in Section IV (‘‘Consideration of Costs 

and Benefits’’), the Commission 

anticipates that SROs will save staff 

time in the preparation and 

transmission of Form 19b–4 as well as 

associated preparation and delivery 

costs. Additionally, the proposed 

amendments to Rule 11Aa3–2 will 

increase efficiency by permitting NMS 

Plan participants to easily locate current 

plan text for compliance purposes. 

The Commission received a number 

of comments on the issue of the effect 

of the proposal on the efficiency of the 

SROs’ rule filing process. One 

commenter stated ‘‘allowing pdf 

attachments would maximize the 

efficiency of the filing process for both 

the SRO and the Commission.’’ 104 The 

Commission notes that the electronic 

Form 19b–4 permits that the majority of 

Exhibits be submitted as PDF 

attachments. Further, the Commission 

believes requiring the documents 

contained in Exhibits 1, 4, and 5 to be 

in Word format will facilitate the ability 

of the Commission to format 19b–4 

public notices and approval orders for 

the Federal Register.

Another commenter stated that they 

believed that the requirement for the 

SROs to post their pending proposed 

rule changes could generate confusion 

because ‘‘many times amendments to 

the submission are filed, before a rule 

change proposal is noticed in the 

Federal Register for public 

comment.’’ 105 The commenter reasoned 

that a ‘‘party would risk wasting 

resources commenting on a proposal 

that might be significantly changed 

before it is formally made available for 

public comment.’’ 106 The Commission 

believes that the requirement to post 

proposed rule changes on SRO Web 

sites increases transparency and only 

minimally affects the efficiency of the 

commenting process. The Commission 

notes that the notice and comment 

process will continue to be triggered by 

publication in the Federal Register. If 

commenters do not want to waste 

resources commenting on a proposal 

that might be significantly changed 

before it is formally noticed for 

comment, then the Commission would 

urge commenters to wait until the 

Commission solicits public comment 

when the proposed rule change is 

noticed in the Federal Register. The 

proposed amendments will merely 

allow commenters to learn of the filing 

of a proposed rule change at an earlier 

point.

Finally, one commenter believes that 

informing ‘‘SROs of its approval of rule 

changes or its notice of effective-uponfiling rules’ on the Web site would be 

‘‘inefficient to administer’’ because 

‘‘(t)his would require SROs to 

constantly monitor the electronic filing 

system to ascertain whether a filing had 

been approved.’’ 107 The commenter 

requests the Commission to develop ‘‘a 

more direct method (e.g., e-mail or 

facsimile transmission) of advising 

SROs that a rule change has been 

approved in order to better achieve its 

goal of increasing the efficiency and 

transparency of the rule change 

process.’’ 108

The Commission agrees with this 

commenter and will develop an 

affirmative electronic notification to 

SROs that a proposed rule change has 

been approved or an effective-uponfiling rule change has been noticed by 

the Commission. As described in further 

detail in Section II(C), supra, the 

Commission is developing an electronic 

notification via an EFFS screen that 

multiple users at the SRO can view to 

determine such information. With such 

electronic notification in place, the 

Commission believes that the proposed 

amendments will provide an efficient 

and prompt procedure for it to notify 

SROs of approval of a proposed rule 

change or notice of an effective-uponfiling rule. 

VI. Regulatory Flexibility Act 

Pursuant to Section 605(b) of the 

Regulatory Flexibility Act,109 the 

Commission certified that amending 

Rule 19b–4 and Form 19b–4 will not 

have a significant economic impact on 

a substantial number of small 

businesses. This certification, including 

the reasons supporting the certification, 

was set forth in the Proposing 

Release.110 The Commission received no 

comments on this certification.

VII. Statutory Basis and Text of 

Proposed Amendments 

The amendments to Regulation S–T 

under the Securities Act of 1933, Rule 

19b–4 and Form 19b–4 under the Act 

are being proposed pursuant to 15 

U.S.C. 78a et seq., particularly sections 

3, 6, 11A, 15A, 15B, 17A, 19(b), 23(a) 

and 36(a) of the Act.

List of Subjects in 17 CFR Parts 232, 

240, and 249 

Reporting and recordkeeping 

requirements, Securities.

■ In accordance with the foregoing, Title 

17, Chapter II of the Code of Federal 

Regulations is amended as follows:

PART 232—REGULATION S–T—

GENERAL RULES AND REGULATIONS 

FOR ELECTRONIC FILINGS

■ 1. The authority citation for part 232 

continues to read in part as follows:

Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 

77s(a), 77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 

78w(a), 78ll(d), 79t(a), 80a–8, 80a–29, 80a–30 

and 80a–37.

* * * * *

■ 2. Section 232.101 is amended by:

60300 Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 

■ a. Removing the word ‘‘and’’ at the end 

of paragraph (a)(1)(vii);

■ b. Removing the period at the end of 

paragraph (a)(1)(viii) and in its place 

adding a semicolon;

■ c. Removing the period at the end of 

paragraph (a)(1)(ix) and in its place 

adding ‘‘; and’’;

■ d. Adding paragraph (a)(1)((x); and

■ e. Revising paragraph (c)(9).

The addition and revision read as 

follows:

§ 232.101 Mandated electronic 

submissions and exceptions. 

(a) * * * 

(1) * * * 

(x) Form 19b–4 (§ 249.819 of this 

chapter).

* * * * *

(c) * * * 

(9) Exchange Act filings submitted to 

the Division of Market Regulation, 

except for Form 19b–4 (§ 249.819 of this 

chapter);

* * * * *

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934

■ 3. The authority citation for part 240 

continues to read in part as follows:

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 

77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, 

78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78p, 

78q, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 79q, 

79t, 80a–20, 80a–23, 80a–29, 80a–37, 80b–3, 

80b–4, 80b–11, and 7201 et seq.; and 18 

U.S.C. 1350, unless otherwise noted.

* * * * *

■ 4. Section 240.11Aa3–2 is amended by 

removing the authority citation 

following § 240.11Aa3–2 and adding 

paragraph (b)(8) to read as follows:

§ 240.11Aa3–2 Filing and amendment of 

national market system plans.

* * * * *

(b) * * * 

(8)(i) A participant in an effective 

national market system plan shall 

ensure that a current and complete 

version of the plan is posted on a plan 

Web site or on a Web site designated by 

plan participants within two business 

days after notification by the 

Commission of effectiveness of the plan. 

Each participant in an effective national 

market system plan shall ensure that 

such Web site is updated to reflect 

amendments to such plan within two 

business days after the plan participants 

have been notified by the Commission 

of its approval of a proposed 

amendment pursuant to paragraph (c) of 

this section. If the amendment is not 

effective for a certain period, the plan 

participants shall clearly indicate the 

effective date in the relevant text of the 

plan. Each plan participant also shall 

provide a link on its own Web site to the 

Web site with the current version of the 

plan. 

(ii) The plan participants shall ensure 

that any proposed amendments filed 

pursuant to paragraph (b) of this section 

are posted on a plan Web site or a 

designated Web site no later than two 

business days after the filing of the 

proposed amendments with the 

Commission. The plan participants shall 

maintain any proposed amendment to 

the plan on a plan Web site or a 

designated Web site until the 

Commission approves the plan 

amendment and the plan participants 

update the Web site to reflect such 

amendment or the plan participants 

withdraw the proposed amendment. If 

the plan participants withdraw 

proposed amendments, the plan 

participants shall remove such 

amendments from the plan Web site or 

designated Web site within two 

business days of withdrawal. Each plan 

participant shall provide a link to the 

Web site with the current version of the 

plan.

* * * * *

■ 5. Section 240.19b–4 is amended by:

■ a. Adding a preliminary note;

■ b. Revising paragraph (a), the 

introductory text of paragraph (e), and 

paragraph (f)(2); and

■ c. Adding paragraphs (j), (k), (l), and 

(m). 

The additions and revisions read as 

follows.

§ 240.19b–4 Filings with respect to 

proposed rule changes by self-regulatory 

organizations. 

Preliminary Note: A self-regulatory 

organization also must refer to Form 

19b–4 (17 CFR 249.819) for further 

requirements with respect to the filing 

of proposed rule changes. 

(a) Filings with respect to proposed 

rule changes by a self-regulatory 

organization, except filings with respect 

to proposed rules changes by selfregulatory organizations submitted 

pursuant to section 19(b)(7) of the Act 

(15 U.S.C. 78s(b)(7)), shall be made 

electronically on Form 19b–4 (17 CFR 

249.819).

* * * * *

(e) For the purposes of this paragraph, 

new derivative securities product means 

any type of option, warrant, hybrid 

securities product or any other security, 

other than a single equity option or a 

security futures product, whose value is 

based, in whole or in part, upon the 

performance of, or interest in, an 

underlying instrument.

* * * * *

(f) * * *

(2) Establishing or changing a due, 

fee, or other charge applicable only to a 

member;

* * * * *

(j) Filings with respect to proposed 

rule changes by a self-regulatory 

organization submitted on Form 19b–4 

(17 CFR 249.819) electronically shall 

contain an electronic signature. For the 

purposes of this section, the term 

electronic signature means an electronic 

entry in the form of a magnetic impulse 

or other form of computer data 

compilation of any letter or series of 

letters or characters comprising a name, 

executed, adopted or authorized as a 

signature. The signatory to an 

electronically submitted rule filing shall 

manually sign a signature page or other 

document, in the manner prescribed by 

Form 19b–4, authenticating, 

acknowledging or otherwise adopting 

his or her signature that appears in 

typed form within the electronic filing. 

Such document shall be executed before 

or at the time the rule filing is 

electronically submitted and shall be 

retained by the filer in accordance with 

§ 240.17a–1. 

(k) If the conditions of this section 

and Form 19b–4 (17 CFR 249.819) are 

otherwise satisfied, all filings submitted 

electronically on or before 5:30 p.m. 

Eastern Standard Time or Eastern 

Daylight Saving Time, whichever is 

currently in effect, on a business day, 

shall be deemed filed on that business 

day, and all filings submitted after 5:30 

p.m. Eastern Standard Time or Eastern 

Daylight Saving Time, whichever is 

currently in effect, shall be deemed filed 

on the next business day. 

(l) The self-regulatory organization 

shall post the proposed rule change, and 

any amendments thereto, on its Web site 

within two business days after the filing 

of the proposed rule change, and any 

amendments thereto, with the 

Commission. Such proposed rule 

change and amendments shall be 

maintained on the self-regulatory 

organization’s Web site until: 

(1) In the case of a proposed rule 

change filed under section 19(b)(2) of 

the Act (15 U.S.C. 78s(b)(2)), the 

Commission approves the proposed rule 

change or the self-regulatory 

organization withdraws the proposed 

rule change, or any amendments, or is 

notified that the proposed rule change is 

not properly filed; or 

(2) In the case of a proposed rule 

change filed under section 19(b)(3)(A) of 

the Act (15 U.S.C. 78s(b)(3)(A)), or any

Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 60301

1Because Section 19(b)(7)(C) of the Act states that 

filings abrogated pursuant to this Section should be 

re-filed pursuant to paragraph (b)(1) of Section 19 

of the Act, SROs are required to file electronically 

such proposed rule changes in accordance with this 

form.

amendment thereto, 60 days after the 

date of filing, unless the self-regulatory 

organization withdraws the proposed 

rule change or is notified that the 

proposed rule change is not properly 

filed; and 

(3) In the case of proposed rule 

changes approved by the Commission 

pursuant to section 19(b)(2) of the Act 

(15 U.S.C. 78s(b)(2)) or noticed by the 

Commission pursuant to section 

19(b)(3)(A) of the Act (15 U.S.C. 

78s(b)(3)(A)), the self-regulatory 

organization updates its rule text as 

required by paragraph (m) of this 

section; and 

(4) In the case of a proposed rule 

change, or any amendment thereto, that 

has been withdrawn or not properly 

filed, the self-regulatory organization 

shall remove the proposed rule change, 

or any amendment, from its Web site 

within two business days of notification 

of improper filing or withdrawal by the 

SRO of the proposed rule change. 

(m) Each self-regulatory organization 

shall post and maintain a current and 

complete version of its rules on its Web 

site. The self-regulatory organization 

shall update its Web site to reflect rule 

changes within two business days after 

it has been notified of the Commission’s 

approval of a proposed rule change filed 

pursuant to section 19(b)(2) of the Act 

(15 U.S.C. 78s(b)(2)) or of the 

Commission’s notice of a proposed rule 

change filed pursuant to section 

19(b)(3)(A) or section 19(b)(7) of the Act 

(15 U.S.C. 78s(b)(3)(A) or 15 U.S.C. 

78s(b)(7)). If a rule change is not 

effective for a certain period, the selfregulatory organization shall clearly 

indicate the effective date in the 

relevant rule text.

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934

■ 6. The authority citation for part 249 

continues to read in part as follows:

Authority: 15 U.S.C. 78a et seq. and 7201 

et seq.; and 18 U.S.C. 1350, unless otherwise 

noted.

* * * * *

■ 7. Section 249.819 and Form 19b–4 are 

revised to read as follows: 

[Note: Form 19b–4 is attached as 

Appendix A to this document.]

§ 249.819 Form 19b–4, for electronic filing 

with respect to proposed rule changes by 

all self-regulatory organizations. 

This form shall be used by all selfregulatory organizations, as defined in 

section 3(a)(26) of the Securities 

Exchange Act of 1934 (15 U.S.C. 

78c(a)(26)), to file electronically 

proposed rule changes with the 

Commission pursuant to section 19(b) of 

the Act and § 240.19b–4 of this chapter.

Dated: October 4, 2004.

By the Commission. 

Margaret H. McFarland, 

Deputy Secretary.

(Note: Appendix A to the preamble 

will not appear in the Code of Federal 

Regulations.)

Appendix A—General Instructions for Form 

19b–4

A. Use of the Form 

All self-regulatory organization proposed 

rule changes, except filings with respect to 

proposed rule changes by self-regulatory 

organizations submitted pursuant to Section 

19(b)(7) 1 of the Securities Exchange Act of 

1934 (‘‘Act’’), shall be filed in an electronic 

format through the Electronic Form 19b–4 

Filing System (‘‘EFFS’’), a secure Web site 

operated by the Commission. This form shall 

be used for filings of proposed rule changes 

by all self-regulatory organizations pursuant 

to Section 19(b) of the Act, except filings 

with respect to proposed rule changes by 

self-regulatory organizations submitted 

pursuant to Section 19(b)(7) of the Act. 

National securities exchanges, registered 

securities associations, registered clearing 

agencies, and the Municipal Securities 

Rulemaking Board are self-regulatory 

organizations for purposes of this form.

B. Need for Careful Preparation of the 

Completed Form, Including Exhibits 

This form, including the exhibits, is 

intended to elicit information necessary for 

the public to provide meaningful comment 

on the proposed rule change and for the 

Commission to determine whether the 

proposed rule change is consistent with the 

requirements of the Act and the rules and 

regulations thereunder applicable to the selfregulatory organization. The self-regulatory 

organization must provide all the information 

called for by the form, including the exhibits, 

and must present the information in a clear 

and comprehensible manner. 

The proposed rule change shall be 

considered filed on the date on which the 

Commission receives the proposed rule 

change if the filing complies with all 

requirements of this form. Any filing that 

does not comply with the requirements of 

this form may be returned to the selfregulatory organization at any time before the 

issuance of the notice of filing. Any filing so 

returned shall for all purposes be deemed not 

to have been filed with the Commission. See 

also Rule 0–3 under the Act (17 CFR 240.0–

3). 

C. Documents Comprising the Completed 

Form 

The completed form filed with the 

Commission shall consist of the Form 19b–

4 Page 1, numbers and captions for all items, 

responses to all items, and exhibits required 

in Item 9. In responding to an item, the 

completed form may omit the text of the item 

as contained herein if the response is 

prepared to indicate to the reader the 

coverage of the item without the reader 

having to refer to the text of the item or its 

instructions. Each filing shall be marked on 

the Form 19b–4 with the initials of the selfregulatory organization, the four-digit year, 

and the number of the filing for the year (i.e., 

SRO–YYYY–XX). If the SRO is filing Exhibit 

2 and 3 via paper, the exhibits must be filed 

within 5 business days of the electronic 

submission of all other required documents. 

D. Amendments 

If information on this form is or becomes 

inaccurate before the Commission takes 

action on the proposed rule change, the selfregulatory organization shall file 

amendments correcting any such inaccuracy. 

Amendments shall be filed as specified in 

Instruction F. 

Amendments to a filing shall include the 

Form 19b–4 Page 1 marked to number 

consecutively the amendments, numbers and 

captions for each amended item, amended 

response to the item, and required exhibits. 

The amended response to Item 3 shall 

explain the purpose of the amendment and, 

if the amendment changes the purpose of or 

basis for the proposed rule change, the 

amended response shall also provide a 

revised purpose and basis statement for the 

proposed rule change. Exhibit 1 shall be refiled if there is a material change from the 

immediately preceding filing in the language 

of the proposed rule change or in the 

information provided. 

If the amendment alters the text of an 

existing rule, the amendment shall include 

the text of the existing rule, marked in the 

manner described in Item 1(a) using brackets 

to indicate words to be deleted from the 

existing rule and underscoring to indicate 

words to be added. The purpose of this 

marking requirement is to maintain a current 

copy of how the text of the existing rule is 

being changed. 

If the amendment alters the text of the 

proposed rule change as it appeared in the 

immediately preceding filing (even if the 

proposed rule change does not alter the text 

of an existing rule), the amendment shall 

include, as Exhibit 4, the entire text of the 

rule as altered. This full text shall be marked, 

in any convenient manner, to indicate 

additions to and deletions from the 

immediately preceding filing. The purpose of 

Exhibit 4 is to permit the staff to identify 

immediately the changes made from the text 

of the rule with which it has been working. 

If the self-regulatory organization is 

amending only part of the text of a lengthy 

proposed rule change, it may, with the 

Commission’s permission, file only those 

portions of the text of the proposed rule 

change in which changes are being made if 

the filing (i.e., partial amendment) is clearly 

understandable on its face. Such partial 

amendment shall be clearly identified and 

marked to show deletions and additions.

If, after the rule change is filed but before 

the Commission takes final action on it, the

60302 Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 

self-regulatory organization receives or 

prepares any correspondence or other 

communications reduced to writing 

(including comment letters) to and from such 

self-regulatory organization concerning the 

proposed rule change, the communications 

shall be filed as Exhibit 2. If information in 

the communication makes the rule change 

filing inaccurate, the filing shall be amended 

to correct the inaccuracy. If such 

communications cannot be filed 

electronically in accordance with Instruction 

F, the communications shall be filed in 

accordance with Instruction G. 

E. Completion of Action by the SelfRegulatory Organization on the Proposed 

Rule Change 

The Commission will not approve a 

proposed rule change before the selfregulatory organization has completed all 

action required to be taken under its 

constitution, articles of incorporation, 

bylaws, rules, or instruments corresponding 

thereto (excluding action specified in any 

such instrument with respect to (i) 

compliance with the procedures of the Act or 

(ii) the formal filing of amendments pursuant 

to state law). Nevertheless, proposed rule 

changes (other than proposed rule changes 

that are to take, or to be put into, effect 

pursuant to Section 19(b)(3) of the Act) may 

be initially filed before the completion of all 

such action if the self-regulatory organization 

consents, under Item 6 of this form, to an 

extension of the period of time specified in 

Section 19(b)(2) or Section 19(b)(7)(D) of the 

Act until at least thirty-five days after the 

self-regulatory organization has filed an 

appropriate amendment setting forth the 

taking of all such action. If a proposed rule 

change to be filed for review under Section 

19(b)(2) or Section 19(b)(7)(D) of the Act is 

in preliminary form, the self-regulatory 

organization may elect to file initially Exhibit 

1 setting forth a description of the subjects 

and issues expected to be involved. 

F. Signature and Filing of the Completed 

Form 

All proposed rule changes, amendments, 

extensions, and withdrawals of proposed rule 

changes shall be filed through the EFFS. In 

order to file Form 19b–4 through EFFS, selfregulatory organizations must request access 

to the SEC’s External Application Server by 

completing a request for an external account 

user ID and password. Initial requests will be 

received by contacting the Market Regulation 

Administrator located on our Web site (http:/

/www.sec.gov). An e-mail will be sent to the 

requestor that will provide a link to a secure 

Web site where basic profile information will 

be requested. 

A duly authorized officer of the selfregulatory organization shall electronically 

sign the completed Form 19b–4 as indicated 

on Page 1 of the Form. In addition, a duly 

authorized officer of the self-regulatory 

organization shall manually sign one copy of 

the completed Form 19b–4, and the manually 

signed signature page shall be maintained 

pursuant to Section 17 of the Act. A 

registered clearing agency for which the 

Commission is not the appropriate regulatory 

agency also shall file with its appropriate 

regulatory agency three copies of the form, 

one of which shall be manually signed, 

including exhibits. The Municipal Securities 

Rulemaking Board also shall file copies of the 

form, including exhibits, with the Board of 

Governors of the Federal Reserve System, the 

Comptroller of the Currency, and the Federal 

Deposit Insurance Corporation. 

G. Procedures for Submission of Paper 

Documents for Exhibits 2 and 3 

To the extent that Exhibits 2 and 3 cannot 

be filed electronically in accordance with 

Instruction F, four copies of Exhibits 2 and 

3 shall be filed with the Division of Market 

Regulation, Securities and Exchange 

Commission, 450 Fifth Street, NW., 

Washington, DC 20549–1001. Page 1 of the 

electronic Form 19b–4 shall accompany 

paper submissions of Exhibits 2 and 3. If the 

SRO is filing Exhibit 2 and 3 via paper, they 

must be filed within five days of the 

electronic filing of all other required 

documents. 

H. Withdrawals of Proposed Rule Changes 

If a self-regulatory organization determines 

to withdraw a proposed rule change, it must 

complete Page 1 of the Form 19b–4 and 

indicate by selecting the appropriate check 

box to withdraw the filing. 

I. Procedures for Granting an Extension of 

Time for Commission Final Action 

After the Commission publishes notice of 

a proposed rule change, if a self-regulatory 

organization wishes to grant the Commission 

an extension of the time to take final action 

as specified in Section 19(b)(2), the selfregulatory organization shall indicate on the 

Form 19b–4 Page 1 the granting of said 

extension as well as the date the extension 

expires. 

BILLING CODE 8010–01–P

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ER08oc04.000</GPH>
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BILLING CODE 8010–01–C

Information To Be Included in the 

Completed Form (‘‘Form 19b–4 

Information’’) 

1. Text of the Proposed Rule Change 

(a) Include the text of the proposed rule 

change. Changes in, additions to, or deletions 

from, any existing rule shall be set forth with 

brackets used to indicate words to be deleted 

and underscoring used to indicate words to 

be added. 

If any form, report, or questionnaire is 

(i) proposed to be used in connection with 

the implementation or operation of the 

proposed rule change, or 

(ii) prescribed or referred to in the 

proposed rule change, then the form, report, 

or questionnaire must be attached to and 

shall be considered as part of the proposed 

rule change. If completion of the form, report, 

or questionnaire is voluntary or is required 

pursuant to an existing rule of the selfregulatory organization, then the form, 

report, or questionnaire, together with a 

statement identifying any existing rule that 

requires completion of the form, report, or 

questionnaire, shall be attached as Exhibit 3. 

If the form, report, or questionnaire cannot be 

filed electronically in accordance with 

Instruction F, the documents shall be filed in 

accordance with Instruction G. 

(b) If the self-regulatory organization 

reasonably expects that the proposed rule 

change will have any direct effect, or 

significant indirect effect, on the application 

of any other rule of the self-regulatory 

organization, set forth the designation or title 

of any such rule and describe the anticipated 

effect of the proposed rule change on the 

application of such other rule. 

(c) Include the file numbers for prior filings 

with respect to any existing rule specified in 

response to Item 1(b). 

2. Procedures of the Self-Regulatory 

Organization 

Describe action on the proposed rule 

change taken by the members or board of 

directors or other governing body of the selfregulatory organization (by amendment if 

initial filing is prior to completion of final 

action). See Instruction E.


ER08oc04.001</GPH>
Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 60305

3. Self-Regulatory Organization’s Statement 

of the Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

Provide a statement of the purpose of the 

proposed rule change and its basis under the 

Act and the rules and regulations thereunder 

applicable to the self-regulatory organization. 

With respect to proposed rule changes filed 

pursuant to Section 19(b)(1) of the Act, 

except for proposed rule changes that have 

been abrogated pursuant to Section 

19(b)(7)(C) of the Act, the statement should 

be sufficiently detailed and specific to 

support a finding under Section 19(b)(2) of 

the Act that the proposed rule change is 

consistent with the requirements of the Act 

and the rules and regulations thereunder 

applicable to the self-regulatory organization. 

With respect to proposed rule changes filed 

pursuant to Section 19(b)(1) of the Act that 

have been abrogated pursuant to Section 

19(b)(7)(C) of the Act, the statement should 

be sufficiently detailed and specific to 

support a finding under Section 19(b)(7)(D) 

of the Act that the proposed rule change does 

not unduly burden competition or efficiency, 

does not conflict with the securities laws, 

and is not inconsistent with the public 

interest or the protection of investors. At a 

minimum, the statement should: 

(a) Describe the reasons for adopting the 

proposed rule change, any problems the 

proposed rule change is intended to address, 

the manner in which the proposed rule 

change will resolve those problems, the 

manner in which the proposed rule change 

will affect various persons (e.g., brokers, 

dealers, issuers, and investors), and any 

significant problems known to the selfregulatory organization that persons affected 

are likely to have in complying with the 

proposed rule change; and 

(b) With respect to the proposed rule 

changes filed pursuant to both Sections 

19(b)(1) and 19(b)(2) of the Act, explain why 

the proposed rule change is consistent with 

the requirements of the Act and the rules and 

regulations thereunder applicable to the selfregulatory organization. A mere assertion that 

the proposed rule change is consistent with 

those requirements is not sufficient. With 

respect to a proposed rule change filed 

pursuant to Section 19(b)(1) of the Act that 

has been abrogated pursuant to Section 

19(b)(7)(C) of the Act, explain why the 

proposed rule change does not unduly 

burden competition or efficiency, does not 

conflict with the securities laws, and is not 

inconsistent with the public interest and the 

protection of investors, in accordance with 

Section 19(b)(7)(D) of the Act. A mere 

assertion that the proposed rule change 

satisfies these requirements is not sufficient. 

In the case of a registered clearing agency, 

also explain how the proposed rule change 

will be implemented consistently with the 

safeguarding of securities and funds in its 

custody or control or for which it is 

responsible. Certain limitations that the Act 

imposes on self-regulatory organizations are 

summarized in the notes that follow.

Note 1. National Securities Exchanges and 

Registered Securities Associations. Under 

Sections 6 and 15A of the Act, rules of a 

national securities exchange or registered 

securities association may not permit unfair 

discrimination between customers, issuers, 

brokers, or dealers, and may not regulate, by 

virtue of any authority conferred by the Act, 

matters not related to the purposes of the Act 

or the administration of the self-regulatory 

organization. Rules of a registered securities 

association may not fix minimum profits or 

impose any schedule of or fix rates of 

commissions, allowances, discounts, or other 

fees to be charged by its members.

Under Section 11A(c)(5) of the Act, a 

national securities exchange or registered 

securities association may not limit or 

condition the participation of any member in 

any registered clearing agency.

Note 2. Registered Clearing Agencies.

Under Section 17A of the Act, rules of a 

registered clearing agency may not permit 

unfair discrimination in the admission of 

participants or among participants in the use 

of the clearing agency, may not regulate, by 

virtue of any authority conferred by the Act, 

matters not related to the purposes of Section 

17A of the Act or the administration of the 

clearing agency, and may not impose any 

schedule of prices, or fix rates or other fees, 

for services rendered by its participants.

Note 3. Municipal Securities Rulemaking 

Board. Under Section 15B of the Act, rules 

of the Municipal Securities Rulemaking 

Board may not permit unfair discrimination 

between customers, issuers, municipal 

securities brokers, or municipal securities 

dealers, may not fix minimum profits, or 

impose any schedule or fix rates of 

commissions, allowances, discounts, or other 

fees to be charged by municipal securities 

brokers or municipal securities dealers, and 

may not regulate, by virtue of any authority 

conferred by the Act, matters not related to 

the purposes of the Act with respect to 

municipal securities or the administration of 

the Board.

4. Self-Regulatory Organization’s Statement 

on Burden on Competition 

State whether the proposed rule change 

will have an impact on competition and, if 

so, (i) state whether the proposed rule change 

will impose any burden on competition or 

whether it will relieve any burden on, or 

otherwise promote, competition and (ii) 

specify the particular categories of persons 

and kinds of businesses on which any burden 

will be imposed and the ways in which the 

proposed rule change will affect them. If the 

proposed rule change amends an existing 

rule, state whether that existing rule, as 

amended by the proposed rule change, will 

impose any burden on competition. If any 

impact on competition is not believed to be 

a significant burden on competition, explain 

why. Explain why any burden on 

competition is necessary or appropriate in 

furtherance of the purposes of the Act. In 

providing those explanations, set forth and 

respond in detail to written comments as to 

any significant impact or burden on 

competition perceived by any person who 

has made comments on the proposed rule 

change to the self-regulatory organization. 

The statement concerning burdens on 

competition should be sufficiently detailed 

and specific to support a Commission finding 

that the proposed rule change does not 

impose any unnecessary or inappropriate 

burden on competition. 

5. Self-Regulatory Organization’s Statement 

on Comments on the Proposed Rule Change 

Received From Members, Participants, or 

Others 

If written comments were received 

(whether or not comments were solicited) 

from members of or participants in the selfregulatory organization or others, summarize 

the substance of all such comments received 

and respond in detail to any significant 

issues that those comments raised about the 

proposed rule change. If an issue is 

summarized and responded to in detail 

under Item 3 or Item 4, that response need 

not be duplicated if appropriate crossreference is made to the place where the 

response can be found. If comments were not 

or are not to be solicited, so state. 

6. Extension of Time Period for Commission 

Action 

State whether the self-regulatory 

organization consents to an extension of the 

time period specified in Section 19(b)(2) or 

Section 19(b)(7)(D) of the Act and the 

duration of the extension, if any, to which 

the self-regulatory organization consents.

Note. The self-regulatory organization may 

elect to consent to an extension of the time 

period specified in Section 19(b)(2) or 

Section 19(b)(7)(D) of the Act until it shall 

file an amendment which specifically states 

that the time period specified in Section 

19(b)(2) or Section 19(b)(7)(D) of the Act shall 

begin to run on the date of filing such 

amendment. 

7. Basis for Summary Effectiveness Pursuant 

to Section 19(b)(3) or for Accelerated 

Effectiveness Pursuant to Section 19(b)(2) or 

Section 19(b)(7)(D) 

(a) If the proposed rule change is to take, 

or to be put into, effect, pursuant to Section 

19(b)(3), state whether the filing is made 

pursuant to paragraph (A) or (B) thereof. 

(b) In the case of paragraph (A) of Section 

19(b)(3), designate that the proposed rule 

change: 

(i) is a stated policy, practice, or 

interpretation with respect to the meaning, 

administration, or enforcement of an existing 

rule, 

(ii) establishes or changes a due, fee, or 

other charge applicable only to a member, 

(iii) is concerned solely with the 

administration of the self-regulatory 

organization, 

(iv) effects a change in an existing service 

of a registered clearing agency that (A) does 

not adversely affect the safeguarding of 

securities or funds in the custody or control 

of the clearing agency or for which it is 

responsible and (B) does not significantly 

affect the respective rights or obligations of 

the clearing agency or persons using the 

service, and set forth the basis on which such 

designation is made, 

(v) effects a change in an existing orderentry or trading system of a self-regulatory 

organization that (A) does not significantly 

affect the protection of investors or the public 

interest; (B) does not impose any significant 

burden on competition; and (C) does not

60306 Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 

*To be completed by the Commission. This date 

will be the date on which the Commission receives 

the proposed rule change filing if the filing 

complies with all requirements of this form. See 

Instruction B to Form 19b–4.

have the effect of limiting the access to or 

availability of the system, or 

(vi) effects a change that (A) does not 

significantly affect the protection of investors 

or the public interest; (B) does not impose 

any significant burden on competition; and 

(C) by its terms, does not become operative 

for 30 days after the date of the filing, or such 

shorter time as the Commission may 

designate if consistent with the protection of 

investors and the public interest; provided 

that the self-regulatory organization has given 

the Commission written notice of its intent 

to file the proposed rule change, along with 

a brief description and text of the proposed 

rule change, at least five business days prior 

to the date of filing of the proposed rule 

change, or such shorter time as designated by 

the Commission. If it is requested that the 

proposed rule change become operative in 

less than 30 days, provide a statement 

explaining why the Commission should 

shorten this time period. 

(c) In the case of paragraph (B) of Section 

19(b)(3), set forth the basis upon which the 

Commission should, in the view of the selfregulatory organization, determine that the 

protection of investors, the maintenance of 

fair and orderly markets, or the safeguarding 

of securities and funds requires that the 

proposed rule change should be put into 

effect summarily by the Commission.

Note. The Commission has the power 

under Section 19(b)(3)(C) of the Act to 

abrogate summarily within sixty days of its 

filing any proposed rule change which has 

taken effect upon filing pursuant to Section 

19(b)(3)(A) of the Act or was put into effect 

summarily by the Commission pursuant to 

Section 19(b)(3)(B) of the Act. In exercising 

its summary power under Section 19(b)(3)(B), 

the Commission is required to make one of 

the findings described above but may not 

have a full opportunity to make a 

determination that the proposed rule change 

otherwise is consistent with the requirements 

of the Act and the rules and regulations 

thereunder. The Commission will generally 

exercise its summary power under Section 

19(b)(3)(B) on condition that the proposed 

rule change to be declared effective 

summarily shall also be subject to the 

procedures of Section 19(b)(2) of the Act. 

Accordingly, in most cases, a summary order 

under Section 19(b)(3)(B) shall be effective 

only until such time as the Commission shall 

enter an order, pursuant to Section 

19(b)(2)(A) of the Act, to approve such 

proposed rule change or, depending on the 

circumstances, until such time as the 

Commission shall institute proceedings to 

determine whether to disapprove such 

proposed rule change or, alternatively, such 

time as the Commission shall, at the 

conclusion of such proceedings, enter an 

order, pursuant to Section 19(b)(2)(B), 

approving or disapproving such proposed 

rule change.

(d) If accelerated effectiveness pursuant to 

Section 19(b)(2) or Section 19(b)(7)(D) of the 

Act is requested, provide a statement 

explaining why there is good cause for the 

Commission to accelerate effectiveness.

8. Proposed Rule Change Based on Rules of 

Another Self-Regulatory Organization or of 

the Commission 

State whether the proposed rule change is 

based on a rule either of another selfregulatory organization or of the 

Commission, and, if so, identify the rule and 

explain any differences between the 

proposed rule change and that rule, as the 

filing self-regulatory organization 

understands it. In explaining any such 

differences, give particular attention to 

differences between the conduct required to 

comply with the proposed rule change and 

that required to comply with the other rule. 

9. Exhibits 

List of exhibits to be filed, as specified in 

Instructions C and D: 

Exhibit 1. Completed Notice of Proposed 

Rule Change for publication in the Federal 

Register. Amendments to Exhibit 1 should be 

filed in accordance with Instructions D and 

F. 

Exhibit 2. (a) Copies of notices issued by 

the self-regulatory organization soliciting 

comment on the proposed rule change and 

copies of all written comments on the 

proposed rule change received by the selfregulatory organization (whether or not 

comments were solicited), presented in 

alphabetical order, together with an 

alphabetical listing of such comments. If 

such notices and comments cannot be filed 

electronically in accordance with Instruction 

F, the notices and comments shall be filed in 

accordance with Instruction G. 

(b) Copies of any transcript of comments 

on the proposed rule change made at any 

public meeting or, if a transcript is not 

available, a copy of the summary of 

comments on the proposed rule change made 

at such meeting. If such transcript of 

comments or summary of comments cannot 

be filed electronically in accordance with 

Instruction F, the transcript of comments or 

summary of comments shall be filed in 

accordance with Instruction G. 

(c) If after the proposed rule change is filed 

but before the Commission takes final action 

on it, the self-regulatory organization 

prepares or receives any correspondence or 

other communications reduced to writing 

(including comment letters) to and from such 

self-regulatory organization concerning the 

proposed rule change, the communications 

shall be filed in accordance with Instruction 

F. If such communications cannot be filed 

electronically in accordance with Instruction 

F, the communications shall be filed in 

accordance with Instruction G. 

Exhibit 3. Copies of any form, report, or 

questionnaire covered by Item 1(a). If such 

form, report, or questionnaire cannot be filed 

electronically in accordance with Instruction 

F, the form, report, or questionnaire shall be 

filed in accordance with Instruction G. 

Exhibit 4. For amendments to a filing, 

marked copies, if required by Instruction D, 

of the text of the proposed rule change as 

amended. 

Exhibit 5. The SRO may choose to attach 

as Exhibit 5 proposed changes to rule text in 

place of providing it in Item I and which may 

otherwise be more easily readable if provided 

separately from Form 19b–4. Exhibit 5 shall 

be considered part of the proposed rule 

change. 

SPECIFIC INSTRUCTIONS FOR EXHIBIT 1—

NOTICE OF PROPOSED RULE CHANGE 

EXHIBIT 1

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 347– ; File No. SR

]

SELF-REGULATORY ORGANIZATIONS 

Proposed Rule Change by (Name of SelfRegulatory Organization) 

Relating to (brief description of subject 

matter of proposed rule change) 

General Instructions 

A. Format Requirements 

Leave a 1-inch margin at the top, bottom, 

and right hand side, and a 11⁄2 inch margin 

at the left hand side. Number all pages 

consecutively. Double space all primary text 

and single space lists of items, quoted 

material when set apart from primary text, 

footnotes, and notes to tables. 

B. Need for Careful Preparation of the Notice 

The self-regulatory organization must 

provide all information required in the notice 

and present it in a clear and comprehensible 

manner. It is the responsibility of the selfregulatory organization to prepare Items I, II 

and III of the notice. The Commission 

cautions self-regulatory organizations to pay 

particular attention to assure that the notice 

accurately reflects the information provided 

in the Form 19b–4 it accompanies. Any filing 

that does not comply with the requirements 

of Form 19b–4, including the requirements 

applicable to the notice, may, at any time 

before the Commission issues a notice of 

filing, be returned to the self-regulatory 

organization. Any document so returned 

shall for all purposes be deemed not to have 

been filed with the Commission. See

Instruction B to Form 19b–4. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934, 15 U.S.C. 

78s(b)(1), notice is hereby given that on 

(date),* the (name of self-regulatory 

organization) filed with the Securities and 

Exchange Commission the proposed rule 

change as described in Items I, II and III 

below, which Items have been prepared by 

the self-regulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons.

Information To Be Included in the 

Completed Notice 

I. Self-Regulatory Organization’s Statement 

of the Terms of Substance of the Proposed 

Rule Change 

(Supply a brief statement of the terms of 

substance of the proposed rule change. If the 

proposed rule change is relatively brief, a 

separate statement need not be prepared, and 

the text of the proposed rule change may be

Federal Register / Vol. 69, No. 159 / Friday, October 8, 2004 / Rules and Regulations 60307

1 17 CFR 200.30–3(a)(12).

inserted in lieu of the statement of the terms 

of substance. If the proposed rule change 

amends an existing rule, indicate changes in 

the rule by brackets for words to be deleted 

and underlined for words to be added.)

II. Self-Regulatory Organization’s Statement 

of the Purpose of, and Statutory Basis for, 

the Proposed Rule Change 

In its filing with the Commission, the selfregulatory organization included statements 

concerning the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed rule 

change. The text of these statements may be 

examined at the places specified in Item IV 

below. The self-regulatory organization has 

prepared summaries, set forth in Sections A, 

B, and C below, of the most significant 

aspects of such statements. (Reproduce the 

headings, and summarize briefly the most 

significant aspects of the responses, to Items 

3, 4, and 5 of Form 19b–4, redesignating 

them as A, B, and C, respectively.) 

III. Date of Effectiveness of the Proposed 

Rule Change and Timing for Commission 

Action 

(If the proposed rule change is to be 

considered by the Commission pursuant to 

Section 19(b)(2) of the Act, the following 

paragraph should be used.)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. 

(If the proposed rule change is to take, or 

to be put into, effect pursuant to Section 

19(b)(3)(A) of the Act and paragraph (f)(6) of 

Rule 19b–4 thereunder, the following 

paragraph should be used.) 

Because the foregoing proposed rule 

change does not: 

(i) Significantly affect the protection of 

investors or the public interest; 

(ii) Impose any significant burden on 

competition; and 

(iii) Become operative for 30 days from the 

date on which it was filed, or such shorter 

time as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act and Rule 19b–4(f)(6) 

thereunder. 

At any time within 60 days of the filing of 

the proposed rule change, the Commission 

may summarily abrogate such rule change if 

it appears to the Commission that such action 

is necessary or appropriate in the public 

interest, for the protection of investors, or 

otherwise in furtherance of the purposes of 

the Act. 

(If the proposed rule change is to take, or 

to be put into, effect pursuant to Section 

19(b)(3)(A) of the Act and subparagraphs (1)–

(5) of paragraph (f) of Rule 19b–4 thereunder, 

the following paragraph should be used.) 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) of 

the Act and paragraph (f) of Rule 19b-4 

thereunder. At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate such 

rule change if it appears to the Commission 

that such action is necessary or appropriate 

in the public interest, for the protection of 

investors, or otherwise in furtherance of the 

purposes of the Act. 

(If the proposed rule change is to be 

considered by the Commission pursuant to 

Section 19(b)(7)(D) of the Act, the following 

paragraph should be used.) 

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) After consultation with the Commodity 

Futures Trading Commission, 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 rulecomments@sec.gov. Please include File 

Number XX on the subject line. 

Paper Comments 

• Send paper comments in triplicate to 

Jonathan G. Katz, Secretary, Securities and 

Exchange Commission, 450 Fifth Street, NW., 

Washington, DC 20549–0609. 

All submissions should refer to File 

Number XX. 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, 450 Fifth Street, NW., 

Washington, DC 20549. Copies of such filing 

also will be available for inspection and 

copying at the principal office of the 

[exchange]. 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 XX and should be submitted on or 

before [insert date 21 days from publication 

in the Federal Register].

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.1

Secretary

[FR Doc. 04–22628 Filed 10–5–04; 9:06 am] 

BILLING CODE 8010–01–P

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES

Food and Drug Administration

21 CFR Part 74

[Docket No. 1987C–0023]

Listing of Color Additives Subject to 

Certification; D&C Black No. 2; 

Confirmation of Effective Date

AGENCY: Food and Drug Administration, 

HHS.

ACTION: Final rule; confirmation of 

effective date.

SUMMARY: The Food and Drug 

Administration (FDA) is confirming the 

effective date of August 30, 2004, for the 

final rule that appeared in the Federal 

Register of July 28, 2004 (69 FR 44927). 

The final rule amended the color 

additive regulations to provide for the 

safe use of D&C Black No. 2 (a high 

purity furnace black, subject to FDA 

batch certification) as a color additive in 

the following cosmetics: Eyeliner, 

brush-on-brow, eye shadow, mascara, 

lipstick, blushers and rouge, makeup 

and foundation, and nail enamel.

DATES: Effective date confirmed: August 

30, 2004.

FOR FURTHER INFORMATION CONTACT:

Celeste Johnston, Center for Food Safety 

and Applied Nutrition (HFS–265), Food 

and Drug Administration, 5100 Paint 

Branch Pkwy., College Park, MD 20740–

3835, 202–418–3423.

SUPPLEMENTARY INFORMATION: In the 

Federal Register of July 28, 2004 (69 FR 

44927), FDA amended the color additive 

regulations to add § 74.2052 D&C Black 

No. 2 (21 CFR 74.2052) to provide for 

the safe use of D&C Black No. 2 as a 

color additive in the following 

cosmetics: Eyeliner, brush-on-brow, eye 

shadow, mascara, lipstick, blushers and 

rouge, makeup and foundation, and nail 

enamel.

FDA gave interested persons until 

August 27, 2004, to file objections or 

requests for a hearing. The agency 

received no objections or requests for a 

hearing on the final rule. Therefore,