20392 Federal Register / Vol. 72, No. 78 / Tuesday April 24, 2007 / Notices 

any medium allowed by this section. In the case of 

records retained on electronic storage media, the 

fund, or person that maintains and preserves 

records on its behalf, must establish and maintain 

procedures: (i) To maintain and preserve the 

records, so as to reasonably safeguard them from 

loss, alteration, or destruction; (ii) to limit access to 

the records to properly authorized personnel, the 

directors of the fund, and the Commission 

(including its examiners and other representatives); 

and (iii) to reasonably ensure that any reproduction 

of a non-electronic original record on electronic 

storage media is complete, true, and legible when 

retrieved. 

9This estimate is based on the following 

calculation: 4,920 registered investment company’s 

× 220 hours = 1,082,400 total hours. 

10The staff estimated the annual cost of 

preserving the required books and records by 

identifying the annual costs for several funds and 

then relating this total cost to the average net assets 

of these funds during the year. The staff estimates 

that the annual cost of preserving records is $70,000 

per fund; the funds queried in support of this 

analysis had an average asset base of approximately 

$2 billion (70,000/2 billion = .000035). 

11This estimate is based on the annual cost per 

dollar of net assets of the average fund as applied 

to the net assets of all funds ($10 trillion × .000035 

= $350 million). 

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

2 15 U.S.C. 78s(b)(3)(A)(iii). 

3 17 CFR 240.19b–4(f)(6). 

4The Commission has modified the text of the 

summaries prepared by Amex. 

The Commission periodically inspects 

the operations of all funds to ensure 

their compliance with the provisions of 

the Act and the rules under the Act. The 

Commission staff spends a significant 

portion of their time in these 

inspections reviewing the information 

contained in the books and records 

required to be kept by rule 31a–1 and 

to be preserved by rule 31a–2. 

There are approximately 4,920 funds 

as of December 31, 2006, all of which 

are required to comply with rule 31a–

2. Based on recent conversations with 

representatives of the fund industry and 

past estimates, our staff estimates that 

each fund currently spends 220 hours 

per year complying with the records 

preservation required by rule 31a–2. 

The hour burden is incurred by a variety 

of fund staff, and the type of staff 

position used for compliance with the 

rule varies widely from fund to fund. 

Based on these estimates, our staff 

estimates that the total annual burden of 

a fund to comply with rule 31a–2, is 220 

hours, with a total annual burden for all 

funds of 1,082,400 hours.9

The hour burden estimates for 

retaining records under rule 31a–2 are 

based on our experience with registrants 

and our experience with similar 

requirements under the Act and the 

rules under the Act. The number of 

burden hours may vary depending on, 

among other things, the complexity of 

the fund, the issues faced by the fund, 

and the number of series and classes of 

the fund. The estimated average burden 

hours are made solely for purposes of 

the Paperwork Reduction Act and are 

not derived from quantitative, 

comprehensive, or even representative 

survey or study of the burdens 

associated with our rules and forms. 

The Commission staff estimates the 

average cost of preserving books and 

records required by rule 31a–2, to be 

approximately $.000035 per $1.00 of net 

assets per year.10 As of December 31, 

2006, our staff estimates total net assets 

of all funds at about $10 trillion, and 

that compliance with rule 31a–2 costs 

the fund industry approximately $350 

million per year.11 Our staff estimates, 

however, based on conversations with 

representatives of the fund industry, 

that funds would already spend half of 

this amount ($175 million) to preserve 

these same books and records, as they 

are also necessary to prepare financial 

statements, meet various state reporting 

requirements, and prepare their annual 

federal and state income tax returns. 

Therefore, we estimate that the total 

annual cost burden for registered fund 

due to compliance with rule 31a–2 is 

$175 million per year. 

These estimates of average costs are 

made solely for the purposes of the 

Paperwork Reduction Act. The estimate 

is not derived from a comprehensive or 

even a representative survey or study of 

the costs of Commission rules. 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 OMB control 

number. 

General comments regarding the 

above information should be directed to 

the following persons: (i) Desk officer 

for the Securities and Exchange 

Commission, Office of Information and 

Regulatory Affairs, Office of 

Management and Budget, Room 10102, 

New Executive Office Building, 

Washington, DC 20503, or e-mail to: 

David_Rostker@omb.eop.gov; and (ii) R. 

Corey Booth, Director/Chief Information 

Officer, Securities and Exchange 

Commission, c/o Shirley Martinson, 

6432 General Green Way, Alexandria, 

Virginia 22312, or send an e-mail to 

PRA_Mailbox@sec.gov. Comments must 

be submitted to OMB within 30 days of 

this notice. 

Dated: April 16, 2007. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–7710 Filed 4–23–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55640; File No. SR–Amex–

2007–04] 

Self-Regulatory Organizations; 

American Stock Exchange LLC; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change Relating to 

Its Buy-In Rules 

April 17, 2007. 

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

Securities Exchange Act of 1934 

(‘‘Act’’),1 notice is hereby given that on 

January 8, 2007, the American Stock 

Exchange LLC (‘‘Amex’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change described in Items I, II, and III 

below, which items have been prepared 

primarily by Amex. Amex filed the 

proposed rule change pursuant to 

Section 19(b)(3)(A) of the Act 2 and Rule 

19b–4(f)(6) thereunder 3 so that the 

proposal was 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 

The purpose of the proposed rule 

change is to amend Amex Rules 759, 

783, 784, and 789 and to adopt new 

Rule 798 to standardize Amex’s buy-in 

rules. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

Amex 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. Amex has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements.4

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

Amex is amending its Rules 783, 784, 

and 789 and is adopting new Rule 798 


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 72, No. 78 / Tuesday April 24, 2007 / Notices 20393 

5A ‘‘buy-in’’ is a transaction between brokerdealers where because the securities are not 

delivered on time by the broker-dealer on the sellside, the broker-dealer on the buy-side purchases 

the securities from another source. 

6Securities Exchange Act Release No. 52842 

(November 28, 2005), 70 FR 72321 (December 2, 

2005) [File No. SR–NYSE–2005–50]. 

7 DTC is a member of the U.S. Federal Reserve 

System, a limited-purpose trust company under 

New York State banking law, and a clearing agency 

registered with the Commission. 

8NSCC is a central counterparty that provides 

centralized clearance, settlement, and information 

services for virtually all broker-to-broker equity, 

corporate bond and municipal bond, exchangetraded funds, and unit investment trust trades in 

the U.S. NSCC provides clearing and settlement, 

risk management, central counterparty services, and 

a guarantee of completion for trades. NSCC also 

nets trades and payments among its members 

thereby reducing the volume of securities and 

payments that need to be exchanged each day. 

9CNS is an automated accounting system that 

centralizes and nets the settlement of compared 

security transactions in order to maintain an orderly 

flow of security and money balances. 

10See Securities Exchange Act Release No. 53528 

(March 21, 2006), 71 FR 15506 (March 28, 2006) 

[File No. SR–NSCC–2005–15] (approving NSCC’s 

CNS buy-in rules). 

11The Committee is made up of representatives 

from a broad cross-section of broker-dealers and 

industry groups. 

12Contracts made for cash within one and onehalf hour before the close of trading are given 

different treatment with respect to timing. When a 

contract made for cash within one and one-half 

hour before the close of trading is to be closed on 

the same day, the time of the transaction shall be 

stated on the order and notice, which shall be 

delivered within thirty minutes after the time of the 

transaction, and the contract shall not be closed 

until thirty-five minutes after the time of the 

transaction. 

to permit buyer executed buy-ins,5 to 

reduce the waiting period to execute a 

buy-in from twenty-one (21) days to 

three (3) days, and to otherwise provide 

more standardized and consistent 

industry buy-in rules and procedures. 

Amex is also making conforming 

changes to Rules 759, 784, and 789. This 

proposal seeks to substantially mirror 

the recent New York Stock Exchange 

(‘‘NYSE’’) amendments to its buy-in 

rules approved by the Commission, 

which were made mainly for the 

purpose of achieving industry 

uniformity.6

Introduction 

The Amex buy-in rules apply to 

transactions that are not subject to the 

rules of a qualified clearing agency, 

such as The Depository Trust Company 

(‘‘DTC’’) 7 and the National Securities 

Clearing Corporation (‘‘NSCC’’) 8, 

including transactions processed in 

NSCC’s Continuous Net Settlement 

service (‘‘CNS’’) 9 that settle through 

them.10 In the event that a buy-in is sent 

to the Amex floor for execution, then 

Amex buy-in rules apply. 

However, under current Amex rules 

that place the responsibility for the 

actual execution of the buy-in on the 

defaulting member or member 

organization (‘‘defaulting member’’ or 

‘‘seller’’), there are disincentives for the 

defaulting member to execute the buyin. For example, the defaulting member 

could potentially manipulate the extent 

to which it has market exposure by 

timing its purchase of the necessary 

securities to benefit itself. Therefore, an 

initiating member or member 

organization (‘‘initiating member’’ or 

‘‘buyer’’) may receive negative customer 

reaction if the customer learns that its 

trade has not been settled and that their 

securities are not available because a 

buy-in has not been executed in a timely 

manner by the defaulting member. 

Other self-regulatory organizations 

(‘‘SROs’’) have recognized this conflict 

of interests, and their buy-in rules 

assign responsibility accordingly by 

allowing the buyer to execute the buyin. By allowing buyers to execute their 

own buy-ins, the defaulting members’

conflicts of interest are avoided, and the 

process is expedited. 

The Securities Industry Association 

(‘‘SIA’’) Securities Operations Division 

Buy-In Committee (‘‘Committee’’) 11 has 

expressed a strong preference that Amex 

consider amending its buy-in rules to 

eliminate is buy-in notice procedures 

and to change who executes the buy-in 

to the buyer from the seller. The 

purpose of the Committee’s 

recommendation is to identify and to 

standardize various buy-in rules and 

procedures regarding the buy-in process 

related to non-CNS transactions and to 

help formulate uniformity among 

industry rules. The Committee 

requested that Amex conform its rules 

to those of the other exchanges that 

allow the initiating member to execute 

buy-ins to close out a contract. 

Current Requirements 

Amex Rule 784 sets forth the 

‘‘mandatory closing of fails’’ process by 

which a buyer is required to close-out 

a contract that has not been completed 

by the seller for a period of twenty-one 

(21) business days. A mandatory closing 

of fails requires that a notice of 

intention be delivered in quadruplicate 

and on the twenty-first (21st) business 

day after the original due date of the 

contract by the initiating member to the 

seller. The member organization 

receiving the notice of intention must 

indicate its position with respect to the 

resolution of the failed trade (e.g., 

doesn’t know the trade, knows the trade 

but cannot deliver, will deliver) and 

return the notice of intention to the 

initiating member no later than three 

business days after the notice was sent. 

If the notice of intention is not returned 

when due or is returned with the 

indication that the contract is not 

known, the initiating member shall 

itself close the contract by buying or 

selling the securities involved through 

its own floor representative. If the notice 

of intention is returned when due with 

an indication that the contract is known 

but that delivery cannot be made and if 

the contract is one which has been 

designated as acceptable for clearance as 

a fail item by a registered clearing 

agency of which both parties are 

clearing members, it shall be submitted 

for clearance by the defaulting member. 

If the notice of intention is returned 

when due with an indication that the 

contract is known but that delivery 

cannot be made and the contract is one 

which has not been designated as 

acceptable for clearance as a fail item by 

a registered clearing agency of which 

both parties are clearing members, the 

initiating member shall close the 

contract according to the procedures in 

Amex Rule 783. Therefore, the rule 

currently provides that more than three 

weeks may lapse before the contract is 

closed. 

Amex Rule 783 sets forth a permissive 

procedure by which an initiating 

member may close-out a contract that 

has not been executed by the defaulting 

member. The initiating member must 

provide notice of its intention to make 

a closing. Pursuant to Amex Rule 783, 

Amex determines the times for the 

delivery of such notices of intention to 

close and orders to close and the time 

for the closing of contracts. If the times 

within which securities may be 

delivered are extended or shortened, the 

time limits established by Amex may be 

similarly extended or shortened.12 Once 

the initiating member sends the notice 

to the defaulting member, the defaulting 

member shall be given a copy of the 

order to close for execution on that day. 

If the order is not executed, the 

defaulting member shall return the 

original order within fifteen minutes of 

the close of trading indicating why it 

cannot be executed, and the buy-in desk 

will deliver a copy of the floor report to 

the initiating member. The initiating 

member may then close the contract and 

must notify the defaulting party with 

respect to any money differences that it 

will claim as damages. If the order is 

executed by the defaulting member, it 

shall furnish a copy of the order to close 

and a copy of the floor report to the buyin desk on the floor. 

Amex Rule 789 requires an initiating 

member to accept physical delivery of 

some or all of the securities that are the 


jlentini on PROD1PC65 with NOTICES
20394 Federal Register / Vol. 72, No. 78 / Tuesday April 24, 2007 / Notices 

13 17 CFR 242.200 through 242.203. Securities 

Exchange Act Release No. 50103 (July 28, 2004), 69 

FR 48008 (August 6, 2004), [File No. S7–23–03] 

(adoption of Regulation SHO). 

14At the same time the changes noted above were 

being developed, the SEC implemented Regulation 

SHO, Regulation of Short Sales, which shares a 

similar purpose, the reduction of fails to deliver, 

with the buy-in rules. Rule 203 to Regulation SHO 

imposes locate and borrowing/ delivery 

requirements on broker-dealers that sell equity 

securities, including close-out requirements on 

certain open fail to deliver positions. 

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

16 17 CFR 240.19b–4(f)(6). 

subject of a buy-in thereby halting the 

buy-in execution for those securities if 

the defaulting member tenders the 

securities prior to the buy-in. The 

defaulting member must promptly 

tender the securities, and if they are not 

promptly delivered, such member or 

member organization is liable for any 

resulting damages. 

Proposal 

Amex is amending Rule 784 to allow 

the member or member organization 

failing to receive the securities to 

execute the buy-in and to reduce the 

waiting period to execute a buy-in from 

twenty-one (21) days to three (3) days 

after delivery on the contract was due. 

The elimination of Commentary .01 

through .06 to Rule 784 is intended to 

facilitate the amendments to the buy-in 

procedures. The amendments to these 

procedures are largely proposed in the 

text of Rule 784. Amex believes that 

once the responsibility is shifted to the 

buy-side of the transaction, the buy-in 

process will work more efficiently. 

The amendments to Rule 784 provide 

that the initiating member may close a 

contract no sooner than three business 

days after the original due date for 

delivery (‘‘Effective Date’’). The 

initiating member must deliver a written 

notice to the defaulting member at least 

two days before the proposed buy-in. 

After receipt of the buy-in notice, the 

defaulting member must then send a 

signed, written response to the initiating 

member stating its position. If the 

response is not received by 5 p.m. ET 

on the day of receipt of the buy-in 

notice or it is returned with an 

indication that the contract is not 

known or that it is known but that 

delivery cannot be made, the buy-in 

may be executed on the Effective Date. 

The initiating member shall be required 

to accept any portion of the securities 

called for by the contract from the 

defaulting member that the defaulting 

member submits prior to the execution 

of the buy-in, but the initiating member 

shall not be required to accept any 

securities from the defaulting member if 

the buy-in has already been executed 

and if the buy-in could not have been 

reasonably cancelled by the initiating 

member. Once the buy-in has been 

executed, the initiating member shall 

notify the defaulting member 

confirming the purchase along with a 

bill or payment. 

Amex is also eliminating the 

requirements for quadruplicate paper 

notices and will permit electronic 

notices, including notices from a 

computerized network facility, or the 

electronic functionality of a Qualified 

Clearing Agency, such as DTC and 

NSCC. The amendments also change the 

existing time deadlines for delivering 

notices, securities, and executions and 

adopt those used by other selfregulatory organizations. 

Amex is also adopting new 

Commentary .01 to Rule 784 to help 

ensure that members and member 

organizations comply with the 

requirements of Regulation SHO.13

Members and member organizations are 

obligated to comply with the marking, 

locate, and delivery requirements of 

Regulation SHO for short sales of equity 

securities. As a result, members and 

member organizations should have 

policies and procedures in place to 

comply with these requirements, 

including close-out procedures.14

Amex is rescinding Rule 783 and has 

incorporated the permissive buy-in 

procedures of Rule 783 into Rule 784. 

Amex is also amending Rule 789 to 

conform it to this proposal to permit 

buyer executed buy-ins and to create a 

Rule 798 to clarify the requirements and 

time frames upon which a defaulting 

member may deliver against a buy-in 

notice. Finally, Amex is making 

technical amendments to Rules 759, 784 

and 789 to better coordinate the rules 

with industry practice. 

Amex believes that the revisions to its 

buy-in rules will help standardize 

Amex’s procedure and practice by 

allowing members and member 

organizations to clean-up fails and 

efficiently deliver Amex-listed 

securities. Amex believes that the 

proposed rule change is consistent with 

Section 6 of the Act in general and 

furthers the objectives of Section 6(b)(5) 

in particular in that it is 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 securities, to remove impediments to 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. By 

amending the Amex buy-in rules to 

permit buyers to execute buy-ins, firms 

are expected to find it easier to execute 

buy-ins of Amex-listed securities. In 

addition, the amendments seek to 

remove inefficient requirements and 

amend time deadlines to conform to 

current industry practice. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

Amex 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 solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change (1) Does not significantly affect 

the protection of investors or the public 

interest, (2) does not impose any 

significant burden on competition, and 

(3) does not become operative for 30 

days from the date of filing or such 

shorter time as the Commission may 

designate if consistent with the 

protection of investors and the public 

interest, the proposed rule change has 

become effective pursuant to Section 

19(b)(3)(A)(iii) of the Act 15 and Rule 

19b–4(f)(6) thereunder.16 As required by 

Rule 19b–4(f)(6)(iii), Amex provided the 

Commission with written notice of its 

intent to file the proposed rule change 

at least five business days prior to filing 

the proposal with the Commission or 

within such shorter period as 

designated by the Commission. 

At any time within sixty (60) days of 

the filing of the proposed rule change, 

the Commission could have summarily 

abrogated such rule change if it 

appeared to the Commission that such 

action was 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: 


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 72, No. 78 / Tuesday April 24, 2007 / Notices 20395 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b 4. 

3 In Amendment No. 1, Nasdaq made clarifying 

changes to the rule text in the NCM convertible debt 

listing standards. Nasdaq also made clarifying 

changes to the purpose section regarding 

convertible debt, rights and warrants, and nonCanadian foreign securities and American 

Depository Receipts. 

4See Securities Exchange Act Release No. 54378 

(August 28, 2006), 71 FR 52351 (September 5, 2006) 

(‘‘Notice’’). 

5 In Amendment No. 2, Nasdaq made minor 

clarifying changes to the purpose section to explain 

the application of the new NCM listing standards 

as they relate to the grace period for noncompliance with the bid requirement pursuant to 

Nasdaq Rules 4310(c)(8)(D), 4320(e)(2)(E)(ii), and 

4450(i). This is a technical amendment and is not 

subject to notice and comment. 

6 In Amendment No. 3, Nasdaq amended its 

initial and continuing listing standards for 

convertible debt to require that current last sale 

information be available in the United States for the 

underlying security into which a convertible debt 

issue is convertible. 

7For a full description of the proposed rule 

change, see Notice, supra note 4 and Amendments 

No. 2 and 3, supra notes 5 and 6. 

8 15 U.S.C. 78f(b). 

9 In approving this proposal, as amended, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

10 15 U.S.C. 78f(b)(5). 

11 See letter from Arnold Golub, Associate 

General Counsel, Nasdaq, to Elizabeth K. King, 

Associate Director, Division (‘‘Division’’), 

Continued 

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–Amex–2007–04 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–Amex–2007–04. 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 

Section, 100 F Street, NE., Washington, 

DC 20549. The text of the proposed rule 

change is available at Amex, the 

Commission’s Public Reference Room, 

and http://www.amex.com/atamex/ 

ruleFilings/at_rulefilings.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 

Number SR–Amex–2007–04 and should 

be submitted on or before May 15, 2007. 

For the Commission by the Division of 

Market Regulation, pursuant to delegated 

authority.17

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–7711 Filed 4–23–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55642; File No. SR–

NASDAQ–2006–032] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing of Amendment No. 3 and Order 

Granting Accelerated Approval of a 

Proposed Rule Change, as Modified by 

Amendments No. 1, 2, and 3 Thereto, 

To Revise The Nasdaq Capital Market 

Listing Requirements 

April 18, 2007. 

I. Introduction 

On August 23, 2006, The NASDAQ 

Stock Market LLC (‘‘Nasdaq’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

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

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

revise certain listing requirements 

applicable to the Nasdaq Capital Market 

(‘‘NCM’’). On August 28, 2006, Nasdaq 

filed Amendment No. 1 (‘‘Amendment 

No. 1’’) to the proposed rule change.3

The proposed rule change, as amended 

by Amendment No. 1, was published for 

comment in the Federal Register on 

September 5, 2006.4 The Commission 

received no comments on the proposal, 

as amended by Amendment No. 1. On 

December 4, 2006, Nasdaq filed 

Amendment No. 2 (‘‘Amendment No. 

2’’) to the proposed rule change.5 On 

February 15, 2007, Nasdaq filed 

Amendment No. 3 (‘‘Amendment No. 

3’’) to the proposed rule change.6 This 

order provides notice of Amendment 

No. 3 and approves the proposed rule 

change on an accelerated basis, as 

amended. 

II. Discussion 

Nasdaq proposes to increase the 

initial and continued listing 

requirements for companies seeking to 

list, or that are already listed, on the 

NCM, as set forth in Nasdaq Rule 4310 

(for domestic and Canadian securities) 

and Nasdaq Rule 4320 (for nonCanadian foreign securities and 

American Depositary Receipts).7

The Commission finds that these 

proposed changes are consistent with 

Section 6(b) of the Act,8 and the rules 

and regulations thereunder applicable to 

a national securities exchange.9 In 

particular, the Commission finds that 

these proposed rule changes are 

consistent with Section 6(b)(5) of the 

Act,10 which requires, among other 

things, that the Exchange’s rules be 

designed to promote just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. 

The development and enforcement of 

adequate standards governing the initial 

listing and maintenance of listing of 

securities is an activity of critical 

importance to financial markets and the 

investing public. Listing standards serve 

as a means for a marketplace to screen 

issuers and to provide listed status only 

to bona fide companies with sufficient 

float, investor base, and trading interest 

to maintain fair and orderly markets. 

Once an issuer has been approved for 

initial listing, the maintenance criteria 

allow a marketplace to monitor the 

status and trading characteristics of that 

issuer to ensure that it continues to meet 

standards for market depth and 

liquidity. 

The changes to the continued listing 

requirements will be effective 30 days 

after the proposed rule change is 

approved by the Commission. Nasdaq 

represents that as of February 9, 2006, 

it is not aware of any issuer currently 

listing on NCM that would fail to meet 

the new continued listing 

requirements.11 In the case of 


jlentini on PROD1PC65 with NOTICES