50856 Federal Register / Vol. 74, No. 189 / Thursday, October 1, 2009 / Notices 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 60487 

(Aug. 12, 2009), 74 FR 41771 (August 18, 2009) 

(‘‘Commission’s Notice’’). 

4See letter from Michael Decker and Mike 

Nicholas, Co-Chief Executive Officers, Regional 

Bond Dealers Association (‘‘RBDA’’), dated 

September 8, 2009. 

5See letter from Margaret C. Henry, Associate 

General Counsel, MSRB, to Elizabeth M. Murphy, 

Secretary, SEC, dated September 22, 2009 

(‘‘Response Letter’’). 

6See supra note 4. 

7 In approving this proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition 

and capital formation. 15 U.S.C. 78c(f). 

8 15 U.S.C. 78o–4(b)(2)(C). 

9 Id. 

10 15 U.S.C. 78s(b)(2). 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

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

proposed rule change to amend Rule G– 

11(i) (settlement of syndicate or similar 

account), Rule G–11(j) (payment of 

designations), and Rule G–12(i) 

(settlement of joint or similar account). 

The proposed rule change was 

published for comment in the Federal 

Register on August 18, 2009.3 The 

Commission received one comment 

letter about the proposed rule change.4

On September 22, 2009, the MSRB filed 

a response to the comment letter.5 This 

order approves the proposed rule 

change. 

The proposed rule change would 

accelerate the settlement of syndicate 

accounts and secondary market trading 

accounts, and the payment of 

designations, by shortening certain time 

periods within the rules. These 

proposals are designed to reduce the 

exposure of syndicate and secondary 

market trading account members to the 

risk of potential deterioration in the 

credit of the syndicate or account 

manager during the pendency of 

account settlements. For the proposed 

amendments to Rule G–11, the MSRB 

requested that the amendments become 

effective for new issues of municipal 

securities for which the Time of Formal 

Award (as defined in Rule G– 

34(a)(ii)(C)(1)(a)) is more than 30 

calendar days after the date the 

amendments are approved by the SEC. 

For the proposed amendments to Rule 

G–12, the MSRB requested that the 

amendments become effective for 

secondary market trading accounts 

formed more than 30 days after the date 

the amendments are approved by the 

SEC. A full description of the proposal 

is contained in the Commission’s 

Notice. 

As previously noted, the Commission 

received one comment letter relating to 

the proposed rule change.6 The RBDA 

generally supported the spirit of the 

MSRB’s proposal and applauded the 

MSRB for acting to reduce risks faced by 

syndicate members, but expressed 

concern about the proposed 

amendments to Rule G–11(j). The RBDA 

supported the proposal to amend Rule 

G–11(i) to reduce the time period for 

closing syndicate accounts to 30 

calendar days following the date the 

issuer delivers the securities to the 

syndicate and also supported the 

proposed amendment to Rule G–12(i) to 

reduce the time to close joint or similar 

accounts—secondary market trading 

accounts—to 30 calendar days following 

the date all securities have been 

delivered by the account manager to the 

account members. However, the RBDA 

believes that the proposed amendments 

to Rule G–11(j) related to payments of 

designations imposing a deadline of two 

business days for submissions of 

designations and 10 calendar days for 

payments of designations is too short 

and would create undue burdens for 

both syndicate members and managers. 

The RBDA recommended that the MSRB 

maintain the current 30-day deadline for 

the payments of designations. 

The MSRB stated in its Response 

Letter that the proposed amendments to 

Rule G–11(j) are intended to reduce the 

exposure of co-managers to the credit 

risk of the senior manager. The MSRB 

noted that in most underwriting 

syndicates, a large percentage of the 

syndicate profits are distributed as 

payments for designations. The MSRB 

believes that the shorter time periods 

are reasonable and that any 

administrative burdens associated with 

the changes are more than outweighed 

by the significant reduction in credit 

risk to co-managers, especially in the 

case of smaller firms. Accordingly, the 

MSRB did not propose to modify the 

proposal. 

The Commission has carefully 

considered the proposed rule change, 

the comment letter received, and the 

MSRB’s response to the comment letter 

and finds that the proposed rule change 

is consistent with the requirements of 

the Act and the rules and regulations 

thereunder applicable to the MSRB7

and, in particular, the requirements of 

Section 15B(b)(2)(C) of the Act 8 and the 

rules and regulations thereunder. 

Section 15B(b)(2)(C) of the Act requires, 

among other things, that the MSRB’s 

rules be designed to prevent fraudulent 

and manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

regulating, clearing, settling, processing 

information with respect to, and 

facilitating transactions in municipal 

securities, to remove impediments to 

and perfect the mechanism of a free and 

open market in municipal securities, 

and, in general, to protect investors and 

the public interest.9 In particular, the 

Commission finds that the proposed 

rule change is consistent with the Act 

because it will further the free and open 

market in municipal securities by 

reducing the exposure of dealers to the 

potential deterioration of the credit of 

syndicate managers during the period 

prior to settlement of syndicate accounts 

and by providing a comparable rule for 

the settlement of secondary market 

trading accounts. The proposed 

amendments will become effective on 

the dates requested by the MSRB. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,10 that the 

proposed rule change (SR–MSRB–2009– 

12), be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–23701 Filed 9–30–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60722; File No. SR–FINRA– 

2009–063] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Extend to November 

30, 2010, the Implementation of FINRA 

Rule 4240 (Margin Requirements for 

Credit Default Swaps) 

September 25, 2009. 

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

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on September 21, 2009, Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by FINRA. FINRA has designated the 

proposed rule change as constituting a 

‘‘non-controversial’’ rule change under 

paragraph (f)(6) of Rule 19b–4 under the 

Act,3 which renders the proposal 

effective upon receipt of this filing by 

the Commission. The Commission is 


PWALKER on DSK8KYBLC1PROD with NOTICES
Federal Register / Vol. 74, No. 189 / Thursday, October 1, 2009 / Notices 50857 

4See Securities Exchange Act Release No. 59955 

(May 22, 2009), 74 FR 25586 (May 28, 2009) (Notice 

of Approval of Proposed Rule Change; File No. SR– 

FINRA–2009–012) (‘‘Approval Order’’). 

5See 74 FR 25588 through 25589. In early 2009 

the Commission enacted interim final temporary 

rules (the ‘‘interim final temporary rules’’) 

providing enumerated exemptions under the 

Federal securities laws for certain CDS to facilitate 

the operation of one or more central clearing 

counterparties in such CDS. See Securities Act 

Release No. 8999 (January 14, 2009), 74 FR 3967 

(January 22, 2009) (Temporary Exemptions for 

Eligible Credit Default Swaps to Facilitate 

Operation of Central Counterparties to Clear and 

Settle Credit Default Swaps). See also Securities 

Exchange Act Release No. 59578 (March 13, 2009), 

74 FR 11781 (March 19, 2009) (Order Granting 

Temporary Exemptions in Connection with Request 

of Chicago Mercantile Exchange Inc. and Citadel 

Investment Group, LLC Related to Central Clearing 

of Credit Default Swaps); Securities Exchange Act 

Release No. 59165 (December 24, 2008), 74 FR 133 

(January 2, 2009) (Order Granting Temporary 

Exemptions for Broker-Dealers and Exchanges 

Effecting Transactions in Credit Default Swaps). 

6See Securities Act Release No. 9063 (September 

14, 2009) (Extension of Temporary Exemptions for 

Eligible Credit Default Swaps). 

7See Exhibit 5. 

8 15 U.S.C. 78o–3(b)(6). 

9See Approval Order, supra note 4. 

10Letter from Gary De Waal, Senior Managing 

Director and Group General Counsel, Newedge 

USA, LLC, to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, dated June 

18, 2009, available at: http://www.sec.gov/rules/sro/ 

finra.shtml. 

11See Regulatory Notice 09–30 (June 2009) 

(Credit Default Swaps). 

12Letter from Daniel McIsaac, Chair, Capital 

Steering Committee, Securities Industry and 

Financial Markets Association, to Marcia E. 

Asquith, Office of the Corporate Secretary, FINRA, 

dated August 3, 2009 (‘‘SIFMA’’), available at: 

http://www.sifma.org/comments/index.aspx. 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to extend to 

November 30, 2010, the implementation 

of FINRA Rule 4240 (Margin 

Requirements for Credit Default Swaps) 

on an interim pilot program basis, and 

to make minor technical changes. 

FINRA Rule 4240, as approved by the 

SEC on May 22, 2009, will expire on 

September 25, 2009. The rule 

implements an interim pilot program 

with respect to margin requirements for 

transactions in credit default swaps 

executed by a member (regardless of the 

type of account in which the transaction 

is booked), including those in which the 

offsetting matching hedging transactions 

are effected by the member in credit 

default swap contracts that are cleared 

through the central counterparty 

clearing services of the Chicago 

Mercantile Exchange. 

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 Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

On May 22, 2009, the Commission 

approved FINRA Rule 4240,4 which 

implements an interim pilot program 

(the ‘‘Interim Pilot Program’’) with 

respect to margin requirements for 

transactions in credit default swaps 

(‘‘CDS’’) executed by a member 

(regardless of the type of account in 

which the transaction is booked), 

including those in which the offsetting 

matching hedging transactions are 

effected by the member in credit default 

swap contracts that are cleared through 

the central counterparty clearing 

services of the Chicago Mercantile 

Exchange (‘‘CME’’). As originally 

approved by the Commission, the rule 

will expire on September 25, 2009. 

As explained in the Approval Order, 

FINRA Rule 4240 is intended to be 

coterminous with certain Commission 

actions intended to address concerns 

arising from systemic risk posed by 

CDS, including, among others, risks to 

the financial system arising from the 

lack of a central clearing counterparty to 

clear and settle CDS.5 Recently, the 

Commission has determined to extend 

the period for which certain of these 

actions are in effect.6 FINRA believes it 

is appropriate to extend the 

implementation of the Interim Pilot 

Program accordingly, to November 30, 

2010. In addition, FINRA is proposing a 

minor technical correction to FINRA 

Rule 4240.01(a).7

FINRA has filed the proposed rule 

change for immediate effectiveness and 

has requested that the SEC waive the 

requirement that the proposed rule 

change not become operative for 30 days 

after the date of the filing, such that 

FINRA can implement the proposed 

rule change immediately. The proposed 

rule change will expire on November 

30, 2010. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,8 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. FINRA believes that the 

proposed rule change will further the 

purposes of the Act because, consistent 

with the goals set forth by the 

Commission when it adopted the 

interim final temporary rules with 

respect to the operation of central 

counterparties to clear and settle CDS, 

the margin requirements set forth by the 

proposed rule change will help to 

stabilize the financial markets. 

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 

The Commission, in approving the 

Interim Pilot Program on an accelerated 

basis, solicited comment on the original 

proposed rule change that established 

the program.9 That comment period 

ended on June 18, 2009. The 

Commission received one comment.10

The commenter raised concerns 

regarding Federal agency action with 

respect to regulation of CDS. FINRA 

declines to respond to those comments 

as beyond the scope of the proposed 

rule change. 

In addition, FINRA received one letter 

in response to the Regulatory Notice 11

announcing the Commission’s approval 

of the original rule change establishing 

the Interim Pilot Program.12 SIFMA 

suggested that, while the adoption of a 

margin rule for CDS addresses an 

important regulatory issue, there are 

certain other obstacles to broker-dealers 

engaging in transactions in CDS, among 

other derivative instruments. While 

FINRA views this comment as generally 

beyond the scope of the proposed rule 

change, FINRA welcomes further 

substantive dialogue on this issue. 

SIFMA also sought clarification as to 


PWALKER on DSK8KYBLC1PROD with NOTICES
50858 Federal Register / Vol. 74, No. 189 / Thursday, October 1, 2009 / Notices 

13See 74 FR 25589. 

14 15 U.S.C. 78s(b)(3)(A). 

15 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

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

give the Commission written notice of its intent to 

file the proposed rule change at least five business 

days prior to the date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. FINRA has satisfied this requirement. 

16For the purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. 

17See supra note 6 and accompanying text. 

18 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

why FINRA Rule 4240 addresses in 

particular CDS transactions that are 

cleared using the central counterparty 

clearing facilities of the CME. In 

response, FINRA notes that, as 

explained in the Approval Order, the 

CME requested that FINRA adopt 

customer margin rules for CDS and 

suggested a specific customer margin 

methodology that could be employed.13

FINRA performed an analysis of the 

margin methodology suggested by CME, 

as well as the alternative methodology 

set forth in Rule 4240(c)(2), prior to 

proposing Rule 4240. The Approval 

Order further noted that FINRA will 

consider proposals it receives from CDS 

central clearing counterparties in 

addition to the CME to amend the 

customer margin rules for CDS and, if 

appropriate, will propose changes to 

such rules. 

SIFMA suggested certain changes to 

the margin requirements set forth in 

FINRA Rule 4240. FINRA believes these 

suggestions are premature and that 

additional time is needed to make a 

meaningful determination about 

whether Rule 4240 should be made 

permanent and whether certain 

provisions should be modified and, if 

so, to what extent. Consequently, at this 

time, FINRA is only seeking to extend 

the Interim Pilot Program and make 

minor technical changes. Lastly, SIFMA 

requested clarification as to certain net 

capital requirements and 

implementation issues, as well as 

documentation issues discussed in 

Regulatory Notice 09–30. FINRA notes 

that it will provide further guidance 

working with the SEC regarding 

implementation of Rule 4240, as 

appropriate. 

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 14 and Rule 19b– 

(f)(6) thereunder.15

Normally, a proposed rule change 

filed under 19b–4(f)(6) may not become 

operative prior to 30 days after the date 

of filing. However, Rule 19b–4(f)(6)(iii) 

permits the Commission to designate a 

shorter time if such action is consistent 

with the protection of investors and the 

public interest. FINRA requested that 

the Commission waive the 30-day 

operative delay, so that the proposed 

rule change may become operative upon 

filing. The Commission believes that the 

earlier operative date is consistent with 

the protection of investors and the 

public interest because the proposed 

rule change permits the Exchange to 

implement without further delay the 

extension of its pilot program.16 This 

will prevent FINRA Rule 4240 from 

lapsing. Additionally, the Commission 

extended the temporary exemptions for 

eligible credit default swaps and 

therefore agrees with FINRA that it is 

appropriate to extend the 

implementation of the Interim Pilot 

Program to November 30, 2010.17

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–2009–063 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Florence E. Harmon, Deputy 

Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2009–063. 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 

Number SR–FINRA–2009–063 and 

should be submitted on or before 

October 22, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–23699 Filed 9–30–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60721; File No. SR– 

NYSEArca–2009–85] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NYSE 

Arca, Inc. Amending Commentary .04 

to Rule 6.4 Series of Options Open for 

Trading 

September 25, 2009. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on 

September 23, 2009, NYSE Arca, Inc. 

(‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed 

with the Securities and Exchange 


PWALKER on DSK8KYBLC1PROD with NOTICES