Federal Register / Vol. 74, No. 20 / Monday, February 2, 2009 / Notices 5877 

7 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(6). 

5See Securities Exchange Act Release No. 52521 

(September 28, 2005), 70 FR 57909 (October 4, 

2005). 

6See Securities Exchange Act Release No. 53580 

(March 30, 2006), 71 FR 17529 (April 6, 2006). In 

2006, the exemptive provision was also relocated 

from NASD Rule 6955(d) to NASD Rule 6958. As 

of December 15, 2008, NASD Rule 6958 was 

renumbered as FINRA Rule 7470. See FINRA 

Regulatory Notice 08–57 (October 2008). 

7See Securities Exchange Act Release No. 54585 

(October 10, 2006), 71 FR 61112 (October 17, 2006). 

8See Securities Exchange Act Release No. 55440 

(March 9, 2007), 72 FR 12852 (March 19, 2007). 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. to 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

DTC’s principal office and on DTC’s 

Web site at <http://www.dtc.org/ 

impNtc/mor/index.html>. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File No. DTC–2009–01 

and should be submitted on or before 

February 23, 2009. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–2162 Filed 1–30–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59274; File No. SR–FINRA– 

2009–001] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to the Exemptive 

Criteria in FINRA Rule 7470 

January 22, 2009. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on January 7, 

2009, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) (f/k/a 

National Association of Securities 

Dealers, Inc. (‘‘NASD’’)) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II below, which Items have been 

prepared by FINRA. FINRA has 

designated the proposed rule change as 

constituting a ‘‘non-controversial’’ rule 

change pursuant to Section 

19(b)(3)(A)(iii) of the Act,3 and Rule 

19b–4(f)(6) thereunder,4 which renders 

the proposal effective upon receipt of 

this filing by the Commission. On 

January 16, 2009, FINRA submitted 

Amendment No. 1 to the proposed rule 

change. The Commission is publishing 

this notice to solicit comments on the 

proposed rule change, as amended, from 

interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to amend FINRA 

Rule 7470 to revise the criteria 

necessary to qualify for an exemption 

from the order recording and data 

transmission requirements in the Order 

Audit Trail System (‘‘OATS’’) Rules for 

manual orders. 

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA and at the 

Commission’s public reading room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

On September 28, 2005, the SEC 

approved amendments to the OATS 

Rules that, among other things, 

permitted FINRA to grant exemptive 

relief from the OATS reporting 

requirements for manual orders.5 The 

exemptive authority was broadened in 

2006 to give FINRA the authority to 

exempt members from the OATS 

recording requirements, in addition to 

the reporting requirements.6 At a 

minimum, members must meet the 

following criteria to be eligible to 

request an exemption from the OATS 

recording and reporting requirements 

for manual orders: (1) The member and 

current control affiliates and associated 

persons of the member have not been 

subject within the last five years to any 

final disciplinary action, and within the 

last ten years to any disciplinary action 

involving fraud; (2) the member has 

annual revenues of less than $2 million; 

(3) the member does not conduct any 

market making activities in Nasdaq 

Stock Market equity securities; (4) the 

member does not execute principal 

transactions with its customers (with 

limited exceptions for principal 

transactions executed pursuant to error 

corrections); and (5) the member does 

not conduct clearing or carrying 

activities for other firms. 

In addition to the amendments to the 

exemptive provision in the OATS Rules 

in 2006, the SEC separately approved 

amendments to the OATS Rules to 

require members to record and report to 

OATS order information relating to OTC 

equity securities.7 The extension of the 

OATS requirements to OTC equity 

securities became effective on February 

4, 2008.8

When the Commission approved the 

exemptive provision in the OATS Rules 

and the amendment extending FINRA’s 

authority under that provision in 2006, 

the OATS Rules applied only to equity 

securities listed on the Nasdaq Stock 

Market. Consequently, at that time, one 

of the minimum criteria for a member to 

request an exemption from the OATS 

requirements, specifically the 

requirement that the member not 

conduct any market making activities, 

was limited to Nasdaq Stock Market 

equity securities. This requirement, 

similar to the other exemptive criteria 

such as the prohibition on principal 

transactions with customers and 

conducting clearing or carrying 

activities for other firms, reflects 

FINRA’s conclusion that exemptive 

relief should only be available to 

members that conduct very limited 

types of trading activities. 

When the OATS recording and 

reporting requirements were extended 

to OTC equity securities, the exemptive 

provision was not similarly extended to 

account for market-making activities in 

OTC equity securities. The proposed 

rule change would amend the minimum 


dwashington3 on PROD1PC60 with NOTICES
5878 Federal Register / Vol. 74, No. 20 / Monday, February 2, 2009 / Notices 

9The proposed rule change would not affect 

exemptions granted or renewed before the effective 

date of the proposed rule change. Any member 

seeking an exemption (or the renewal of an existing 

exemption) after the effectiveness of the proposed 

rule change would be required to meet the 

eligibility criteria as amended by the proposed rule 

change. 

10 15 U.S.C. 78o–3(b)(6). 

11 15 U.S.C. 78s(b)(3)(A). 

12 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

provide the Commission with written notice of its 

intent to file the proposed rule change, along with 

a brief description and text of the proposed rule 

change, at least five business days prior to the date 

of filing of the proposed rule change, or such 

shorter time as designated by the Commission. 

FINRA has fulfilled this requirement. 

13For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 14 17 CFR 200.30–3(a)(12). 

criteria to seek exemptive relief from the 

recording and reporting requirements of 

the OATS Rules for manual orders to 

require that a member not conduct any 

market making activities in OTC equity 

securities. The proposed rule change 

would make explicit that members that 

make a market in any security subject to 

the OATS Rules (Nasdaq Stock Market 

or OTC equity securities) are not eligible 

for exemptive relief under Rule 7470.9

FINRA has filed the proposed rule 

change for immediate effectiveness and 

has requested that the SEC waive the 

requirement that the proposed rule 

change not become operative for 30 days 

after the date of filing, such that FINRA 

can implement the proposed rule 

change immediately. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,10 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. FINRA believes that the 

proposed rule change is consistent with 

the original intent of limiting eligibility 

for an exemption and furthering the 

goals of the FINRA’s OATS by codifying 

that members that conduct marketmaking activities in any security subject 

to the OATS Rules are not eligible for 

exemptive relief under Rule 7470. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

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 11 and Rule 19b–4(f)(6) 

thereunder.12

FINRA has asked the Commission to 

waive the operative delay to permit the 

proposed rule change to become 

operative prior to the 30th day after 

filing. FINRA has stated that it believes 

that it is important to correct and 

conform the OATS exemptive 

provisions as soon as possible to 

eliminate any confusion as to the 

criteria to be eligible for exemptive 

relief under Rule 7470. 

The Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest.13 The 

Commission believes that the proposed 

rule should help ensure that the 

exemptive relief provided for in FINRA 

Rule 7470 continues to be available only 

to members that conduct very limited 

types of trading activities. The 

Commission, therefore, designates the 

proposal operative upon filing. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–FINRA–2009–001 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2009–001. 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, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of FINRA. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File No. 

SR–FINRA–2009–001 and should be 

submitted on or before February 23, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–2122 Filed 1–30–09; 8:45 am] 

BILLING CODE 8011–01–P 


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