Federal Register / Vol. 72, No. 73 / Tuesday, April 17, 2007 / Notices 19223 

6 15 U.S.C. 78f(b)(4). 

7 15 U.S.C. 78s(b)(3)(A). 

8 17 CFR 240.19b–4(f)(2). 

9For purposes of calculating the 60-day period 

within which the Commission may summarily 

abrogate the proposed rule change under Section 

19(b)(3)(C) of the Act, the Commission considers 

the period to commence on April 10, 2007, the date 

on which the CHX filed Amendment No. 1. See 15 

U.S.C. 78s(b)(3)(C). 

10 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)(3). 

2. Statutory Basis 

The proposed rule change is consistent 

with Section 6(b)(4) of the Act 6 in that 

it provides for the equitable allocation 

of reasonable dues, fees and other 

charges among its members. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change establishes or changes a member 

due, fee or other charge imposed by the 

Exchange, it has become effective 

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

Act 7 and subparagraph (f)(2) of Rule 

19b–4 thereunder.8 At any time within 

60 days of the filing of such 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.9

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-CHX–2007–11 on the 

subject line. 

Paper comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–CHX–2007–11. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for inspection and copying in 

the Commission’s Public Reference 

Room. Copies of such filing also will be 

available for inspection and copying at 

the principal office of the CHX. 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–CHX–2007–11 and should 

be submitted on or before May 8, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.10

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–7223 Filed 4–16–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55617; File No. SR–NASD–

2007–022] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Make Technical 

Amendments to the Code of Mediation 

Procedure 

April 11, 2007. 

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 March 16, 

2007, the National Association of 

Securities Dealers, Inc. (‘‘NASD’’), 

through its wholly owned subsidiary, 

NASD Dispute Resolution, Inc. (‘‘NASD 

Dispute Resolution’’) filed with the 

Securities and Exchange Commission 

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

rule change as described in Items I, II, 

and III below, which Items have been 

prepared by NASD Dispute Resolution. 

NASD has designated the proposed rule 

change as concerned solely with the 

administration of the self-regulatory 

organization under Section 

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

19b–4(f)(3) thereunder,4 which renders 

the proposal effective upon filing with 

the Commission. The Commission is 

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 

NASD Dispute Resolution is 

proposing to amend the Code of 

Mediation Procedure to re-number 

Rules 10401 through 10410 and update 

cross references within the re-numbered 

rules. The text of the proposed rule 

change is available on NASD’s Web site 

(http://www.nasd.com), at NASD’s 

principal office, 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, 

NASD 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. NASD 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 

In 1998, the SEC launched an 

initiative to encourage issuers and selfregulatory organizations to use ‘‘plain 

English’’ in disclosure documents and 

other materials used by investors. In 

response, NASD undertook to rewrite 

the NASD Code of Arbitration 

Procedure (‘‘old Code’’) in ‘‘plain 


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19224 Federal Register / Vol. 72, No. 73 / Tuesday, April 17, 2007 / Notices 

5See Exchange Act Release No. 51856 (June 15, 

2005), 70 FR 36442 (June 23, 2005) (File No. SR–

NASD–2003–158) (Notice of Filing of Proposed 

Rule Change and Amendment Nos. 1, 2, 3, and 4 

Thereto to Amend NASD Arbitration Rules for 

Customer Disputes). 

6 In 2004, NASD filed separately with the SEC the 

Industry and Mediation Codes. See Exchange Act 

Release No. 51857 (June 15, 2005), 70 FR 36430 

(June 23, 2005) (File No. SR–NASD–2004–011) 

(Notice of Filing of Proposed Rule Change and 

Amendment Nos. 1, 2, 3, and 4 Thereto to Amend 

NASD Arbitration Rules for Industry Disputes); and 

Exchange Act Release No. 51855 (June 15, 2005), 70 

FR 36440 (June 23, 2005) (File No. SR–NASD–

2004–013) (Notice of Filing of Proposed Rule 

Change and Amendments No. 1 and 2 Thereto to 

Amend NASD Arbitration Rules for Mediation 

Proceedings). 

7See Exchange Act Release No. 52705 (Oct. 31, 

2005), 70 FR 67525 (Nov. 7, 2005) (File No. SR–

NASD–2004–013) (Order Granting Approval to 

Proposed Rule Change and Amendments Nos. 1 and 

2 Thereto, and Notice of Filing and Order Granting 

Accelerated Approval to Amendment No. 3, to 

Amend NASD Rules for Mediation Proceedings). 

8The changes were announced in Notice to 

Members 05–85 (Dec. 2005). 

9See Exchange Act Release No. 55158 (Jan. 24, 

2007), 72 FR 4574 (Jan. 31, 2007) (File Nos. SR–

NASD–2003–158 and SR–NASD–2004–011) (Order 

Approving Proposed Rule Change and Amendments 

1, 2, 3, and 4 to Amend NASD Arbitration Rules 

for Customer Disputes and Notice of Filing and 

Order Granting Accelerated Approval of 

Amendments 5, 6, and 7 Thereto; Order Approving 

Proposed Rule Change and Amendments 1, 2, 3, 

and 4 to Amend NASD Arbitration Rules for 

Industry Disputes and Notice of Filing and Order 

Granting Accelerated Approval of Amendments 5, 

6, and 7 Thereto). 

10The changes were announced in Notice to 

Members 07–07 (Feb. 2007). 

11See Id. at nn. 7 & 9. The Customer Code will 

use the Rule 12000 series, the Industry Code will 

use the Rule 13000 series, and the Mediation Code 

will use the Rule 14000 series, all of which are 

currently unused under the NASD numbering 

system. Id. 

12 15 U.S.C. 78o–3(b)(6). 13 17 CFR 240.19b–4(f)(3). 

English.’’ This undertaking became the 

Code Revision Project (‘‘Project’’). 

NASD began to implement the Project 

in 2003 when it filed with the SEC a 

proposed rule change to the old Code to 

reorganize the rules, simplify the 

language, codify current practices, and 

implement several substantive changes.5

The proposal reorganized NASD’s old 

dispute resolution rules (Rules 10000 et 

seq.) into three separate procedural 

codes: the NASD Code of Arbitration 

Procedure for Customer Disputes 

(‘‘Customer Code’’); the NASD Code of 

Arbitration Procedure for Industry 

Disputes (‘‘Industry Code’’); and the 

NASD Code of Mediation Procedure 

(‘‘Mediation Code’’).6 The three new 

Codes would replace the old Code in its 

entirety. 

On October 31, 2005, the SEC 

approved the Mediation Code.7 It 

became effective on January 30, 2006.8

On January 24, 2007, the SEC approved 

the Customer Code and Industry Code.9

The Customer and Industry Codes will 

become effective on April 16, 2007.10

Because the Mediation Code became 

effective before the Customer and 

Industry Codes were approved, NASD 

implemented the Mediation Code by 

replacing the old rules governing 

mediation (Rules 10400 et seq.) in the 

old Code with the rules of the Mediation 

Code. To minimize confusion and to 

assist the users of the dispute resolution 

forum, NASD re-numbered the rules of 

the Mediation Code so that they would 

be consistent with the numbering in the 

old Code, which was still in effect at the 

time the Mediation Code became 

effective. In replacing the old rules with 

those of the Mediation Code, NASD 

changed cross-references to proposed 

rules of the Customer and Industry 

Codes to applicable rules of the old 

Code, and removed rule language that 

was based on the proposed codes. 

Under this proposed rule change, 

NASD is proposing to remove Rules 

10401 through 10410 of the Mediation 

Code from the old Code and re-number 

them so that the Mediation Code 

becomes a separate procedural code, as 

proposed and approved by the SEC.11

NASD also is proposing to change crossreferences to applicable rules of the 

Customer and Industry Codes, and reinsert definitions of ‘‘NASD Customer 

Code’’ and ‘‘NASD Industry Code’’ in 

Rules 14100(g) and Rules 14100(h) 

respectively, which had been reserved 

until the new Codes were approved. 

2. Statutory Basis 

NASD believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,12 which 

requires, among other things, that 

NASD’s 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. NASD believes that the 

proposed rule change is consistent with 

the provision of the Act noted above 

because it will provide useful guidance 

to parties, mediators and staff, and will 

help standardize the administration of 

NASD mediations. 

(B) Self-Regulatory Organization’s 

Statement on Burden on Competition 

NASD 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 by NASD. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

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

4(f)(3) thereunder because it is 

concerned solely with the 

administration of the self-regulatory 

organization.13 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–NASD–2007–022 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NASD–2007–022. 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 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 72, No. 73 / Tuesday, April 17, 2007 / Notices 19225 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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 at 

the principal office of NASD. 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 the File 

Number SR–NASD–2007–022 and 

should be submitted on or before May 

8, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–7222 Filed 4–16–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55615; File No. SR–NYSE–

2007–34] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing of Proposed Rule Change To 

Amend NYSE Rule 80A.40(b) To 

Update the Definition of ‘‘Program 

Trading,’’ To Substitute Simplified 

Audit Trail Requirements, and To Make 

Conforming Amendments to NYSE 

Rule 410B 

April 11, 2007. 

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 March 22, 

2007, the New York Stock Exchange 

LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II and III below, which Items 

have been prepared substantially by 

NYSE. The Commission is 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 

NYSE proposes to amend NYSE Rule 

80A.40(b) to update the definition of 

‘‘program trading’’ by eliminating the 

pre-determined minimum dollar value 

requirement for trading strategies that 

involve the related purchase or sale of 

a ‘‘basket’’ or group of 15 or more 

stocks, to substitute simplified audit 

trail requirements, and to make 

conforming amendments to Rule 410B. 

The text of the proposed rule change is 

available at NYSE, http:// 

www.nyse.com, and 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, 

NYSE included statements concerning 

the purpose of and basis for the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. NYSE 

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 

In order to improve the reporting and 

monitoring of program trading by the 

Exchange, NYSE proposes to clarify 

what constitutes program trading and to 

streamline the process for entering and 

identifying program trades. To 

accomplish this, the Exchange is 

proposes (i) to amend NYSE Rule 

80A.40 to eliminate the minimum dollar 

value from the definition of program 

trading, and (ii) to substitute simplified 

audit trail requirements in place of the 

more cumbersome reporting 

requirements that currently apply to 

program trading. The proposed 

amendments also include certain 

conforming amendments to NYSE Rule 

410B. In connection with these changes, 

the Exchange also intends to issue 

guidance regarding the definition of a 

‘‘coordinated strategy,’’ as that term is 

used in Rule 80A.40. 

Background. The Exchange adopted 

Rule 80A in the wake of the 1987 

market break to address various 

coordinated professional trading 

strategies, in particular, program trading 

that was using the cash market to take 

advantage of trading in the derivatives 

market. To ensure that the rule would 

encompass the various permutations 

that such trading strategies might take, 

the Exchange defined program trading 

as either index arbitrage or ‘‘any trading 

strategy involving the related purchase 

or sale of a ’basket’ or group of 15 or 

more stocks having a total market value 

of $1 million or more.’’ The monetary 

value was believed at the time to 

capture program trading strategies that 

would be significant in the context of 

the market. Despite a significant 

increase in the size and value of trading 

in the market since 1987, however, this 

monetary component of the definition 

has not been updated since it was 

adopted. 

Proposed Redefinition of Program 

Trading. Given the technical and 

automated nature of the trading 

environment that exists today, the 

Exchange believes that the current 

definition of ‘‘program trading’’ is no 

longer workable, since, among other 

things, it captures certain computerdriven or algorithmic trading strategies 

that are not intended to be program 

trades. At the same time, certain 

strategies that could fairly be classified 

as programs—that is, strategies 

involving 15 or more stocks that are 

intended to be coordinated, but which 

do not meet the monetary threshold—

are not being captured. 

In contrast to 1987, most firms today 

employ algorithmic trading to manage 

and carry out both plain-vanilla 

execution strategies that are not 

intended to be programs, including 

public-customer driven parameter-based 

trading (that is, trading in which the 

customer specifies certain desired 

execution conditions such as timing, 

pricing, quantity, or marketplace 

selection, and the algorithm evaluates 

market information and generates orders 

that best match the specified conditions 

without further human intervention), 

and more complex trading strategies 

that are intended to be programs. The 

Exchange therefore recognizes that not 

all computer-driven trading strategies 

constitute Program Trading. For 

example, if they otherwise lack the 

other definitional characteristics of 

program trading, algorithmic trading, 

volume-weighted average price 

(‘‘VWAP’’) trading, statistical arbitrage, 

and similar computer-driven trading 

strategies may not need to be classified 

or reported as a program simply because 

the strategy is executed through a 

computer model or ‘‘black box.’’

This has led to regulatory confusion; 

indeed, member firms have informed 

the Exchange that in order to ensure full 

compliance with the rule, they feel 

compelled to report computer-driven 

trading strategies that meet the technical 

definition of a program even though 

they are not, in fact, intended as 

program trading. 

To address the issue of the overbroad 

definition of program trading and to 

improve the precision of program trade 

reporting, the Exchange proposes to 

amend the definition of program trading 

under NYSE Rule 80A.40 to eliminate 


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