2914 Federal Register / Vol. 72, No. 14 / Tuesday, January 23, 2007 / Notices 

10 15 U.S.C. 78f(b)(4). 

11 17 CFR 200.30–3(a)(12). 

12 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 In Amendment No. 1, NASD clarified provisions 

of the proposed rule change. 

4See Exchange Act Release No. 54857 (Dec. 1, 

2006), 71 FR 71213 (Dec. 8, 2006). 

5See Exchange Act Release No. 51931 (June 28, 

2005) (File No. SR–NASD–2005–052), 70 FR 38989 

(July 6, 2005). 

6See Exchange Act Release No. 55038 (Jan. 3, 

2007) (File No. SR–NASD–2005–079). Previously, 

Rule 10322 allowed arbitrators and any counsel of 

record to the proceedings to issue subpoenas as 

provided by law. 

7For purposes of this rule, a contested motion is 

defined as a motion to issue a subpoena, the draft 

subpoena, a written objection from the party 

opposing the issuance of the subpoena, and any 

other documents supporting a party’s position. 

Arbitrators will not be entitled to receive the 

honorarium if a motion for a subpoena is 

uncontested. 

8This differs from other discovery-related 

motions, for which an arbitrator receives an 

honorarium for each motion considered. See IM–

or other charge imposed by the 

Exchange, it has become effective 

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

Act 10 and subparagraph (f)(2) of Rule 

19b–4 thereunder.11 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. 

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 

No. SR–CHX–2006–39 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–2006–39. 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–2006–39 and should 

be submitted on or before February 13, 

2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–907 Filed 1–22–07; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55108; File No. SR–NASD–

2006–101] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Order Approving 

Proposed Rule Change and 

Amendment No. 1 Thereto To Provide 

for the Payment of a $200 Honorarium 

Per Case for Each Arbitrator Who 

Considers Contested Motions for the 

Issuance of Subpoenas 

January 16, 2007. 

I. Introduction 

On August 23, 2006, the National 

Association of Securities Dealers, Inc. 

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

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’), pursuant to Section 

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

of 1934 (‘‘Exchange Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to amend IM–10104 of the 

NASD Code of Arbitration Procedure 

(‘‘Code’’) to provide for the payment of 

a $200 honorarium per case for each 

arbitrator who considers contested 

motions for the issuance of subpoenas. 

On November 13, 2006, NASD filed 

Amendment No. 1 to the proposed rule 

change.3 The proposed rule change, as 

amended, was published for comment 

in the Federal Register on December 8, 

2006.4 The Commission received no 

comments on the proposal. This order 

approves the proposed rule change, as 

amended. 

II. Description 

The purpose of the proposed rule 

change is to provide for the payment of 

a $200 honorarium per case for each 

arbitrator who considers contested 

motions for the issuance of subpoenas. 

NASD previously amended IM–10104, 

to provide arbitrators with an 

honorarium of $200 to decide discoveryrelated motions without a hearing 

session.5 The revised rule, however, 

does not address whether a contested 

motion concerning a subpoena 

constitutes a discovery-related motion. 

As a result, NASD has received 

questions regarding the appropriate 

payment, if any, for arbitrators who 

decide subpoena issues. These 

questions have focused on whether, 

under the rule, arbitrators should be 

paid to decide contested motions 

requesting the issuance of a subpoena. 

The issue of whether arbitrators 

should receive an honorarium for 

deciding contested subpoena motions 

has become even more significant with 

the Commission’s recent approval of 

amendments to NASD Rule 10322 

which, among other changes, permit 

only arbitrators to issue subpoenas in 

NASD arbitrations.6

In proposing the current rule change, 

NASD recognized that arbitrators may 

spend a considerable amount of time 

and effort deciding contested subpoena 

motions 7 and stated it believes that 

arbitrators should be compensated for 

this work. NASD anticipated that if its 

proposed changes to Rule 10322 were 

approved, under most circumstances, 

the chairperson would be the only 

arbitrator considering subpoena requests 

based on the documents supplied by the 

parties. If the entire panel decided a 

contested motion, each arbitrator who 

participates in the subpoena ruling 

would receive an honorarium of $200. 

The $200 honorarium paid to an 

arbitrator would provide payment for all 

contested subpoena motions in a case 

(i.e., the honorarium would be paid on 

a per case basis, regardless of the 

number of contested subpoena motions 

considered by an arbitrator or panel 

during the case).8 Furthermore, the 

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Federal Register / Vol. 72, No. 14 / Tuesday, January 23, 2007 / Notices 2915 

10104(e). If the panel has received the honorarium 

for considering a contested subpoena request and 

subsequently receives a number of new contested 

subpoena requests, however, the chairperson may 

call a prehearing conference to hear and decide 

these matters, for which the participating 

arbitrator(s) would receive the normal prehearing 

honorarium. See IM–10104(a) and (b). 

9 In situations where more than three different 

arbitrators consider contested subpoena requests, 

NASD will pay the additional honorarium. For 

example, if all three members of a panel have 

decided a contested subpoena request and the 

chairperson is thereafter replaced by another 

arbitrator, NASD would pay the $200 honorarium 

to the replacement chairperson for deciding any 

later contested subpoena requests, because the 

parties already would have incurred $600 in costs 

relating to the requests. Likewise, if there have been 

three different chairpersons in the same proceeding, 

each of whom has considered a contested subpoena 

request, NASD would pay the $200 honorarium 

should a fourth chairperson consider a contested 

subpoena request. NASD does not anticipate that 

either of these situations will occur frequently. 

10 15 U.S.C. 78o–3(b)(5). 

11 15 U.S.C. 78o–3(b)(6). 

12 In approving this proposed rule change, as 

amended, the Commission notes that it has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

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

13 15 U.S.C. 78f(b)(5). 

14 17 CFR 200.30–3(a)(12). 

1The amendment was not substantive. 

2 15 U.S.C. 78s(b)(1). 

3Securities Exchange Act Release No. 54822 

(November 28, 2006), 71 FR 70820. 

4For example, the reference in Rule 4, Section 1 

to the ‘‘market value’’ of Qualifying Bonds has been 

corrected to accurately reference the ‘‘collateral 

value’’ of Eligible Clearing Fund Securities. 

5Rule 4 (Clearing Fund), Procedure XV (Clearing 

Fund Formula and Other Matters), and Appendix 

1 (Version 2 of Procedure XV—Limited 

Applicability). 

6Mutual Fund/Insurance Service Members are 

not permitted to use Qualifying Bonds or 

irrevocable letters of credit to satisfy their Required 

Deposits. 

7See supra note 6. 

8 ‘‘Qualifying Bonds’’ is currently defined in Rule 

4 as unmatured bonds that are either direct 

obligations of or obligations guaranteed as to 

principal and interest by the United States or its 

agencies. 

maximum amount that would be paid 

by the parties, collectively, for any one 

case would be $600, irrespective of any 

changes to the composition of the 

panel.9 NASD believes that structuring 

the honorarium in this manner will 

limit the arbitration costs for parties 

while at the same time compensating 

arbitrators for the time that they spend 

considering contested subpoena 

requests. 

III. Discussion and Findings 

The Commission finds that the 

proposed rule change is consistent with 

the provisions of Sections 15A(b)(5) 10

and 15A(b)(6) 11 of the Exchange Act, 

which require, among other things, that 

NASD’s rules provide for the equitable 

allocation of reasonable dues, fees, and 

other charges among members and 

issuers and other persons using any 

facility or system that the NASD 

operates or controls, and that NASD’s 

rules 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. The 

Commission believes that the proposed 

rule change is consistent with the 

provisions of the Exchange Act noted 

above because the rule change provides 

that the panel will have the ability to 

allocate the honorarium for deciding a 

discovery-related motion equitably 

among the parties.12 Moreover, the 

Commission believes the proposed rule 

change will encourage arbitrators to 

decide contested subpoena requests 

without scheduling a prehearing 

conference, thereby expediting the 

arbitration process for parties. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Exchange Act 13

that the proposed rule change (SR–

NASD–2006–101), as amended, be, and 

hereby is, approved. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–864 Filed 1–22–07; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55095; File No. SR–NSCC–

2006–11] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Order Approving 

Proposed Rule Change To Amend Its 

Rules and Procedures With Respect to 

Clearing Fund Collateral 

January 12, 2007. 

I. Introduction 

On October 3, 2006, the National 

Securities Clearing Corporation 

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

Exchange Commission (‘‘Commission’’) 

and on October 25, 2006, amended 1

proposed rule change SR–NSCC–2006–

11 pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’).2 Notice of the proposal was 

published in the Federal Register on 

December 6, 2006.3 No comment letters 

were received. For the reasons 

discussed below, the Commission is 

approving the proposed rule change as 

amended. 

II. Description 

NSCC is modifying its rules regarding 

Clearing Fund collateral requirements in 

order to improve liquidity and minimize 

risk for NSCC and its members. NSCC 

is also making certain technical 

corrections to the text of Rule 4 to 

conform the rule to actual practice.4

Under NSCC’s Rules,5 members are 

required to make deposits to the 

Clearing Fund. The amount of each 

member’s required deposit (‘‘Required 

Deposit’’) is fixed by NSCC in 

accordance with one or more formulas. 

Presently, a member’s Required Deposit 

may be satisfied with a cash deposit, 

and a portion of a member’s Required 

Deposit may be evidenced by an open 

account indebtedness secured by 

Qualifying Bonds and/or one or more 

irrevocable letters of credit issued under 

certain guidelines established within 

NSCC’s Rules.6 Currently, NSCC 

haircuts the value that Qualifying Bonds 

receive when used to meet a member’s 

Clearing Fund requirement and will not 

allow a letter of credit to be used if by 

doing so more than twenty percent of 

NSCC’s total Clearing Fund would 

consist of letters of credit issued by that 

approved letter of credit issuing bank. 

Each member is entitled to any Clearing 

Fund interest earned or paid on 

Qualifying Bonds and cash deposits. 

NSCC is modifying its rules to: (1) 

Expand the types of instruments which 

NSCC may accept as Qualifying Bonds 

(‘‘Eligible Clearing Fund Securities’’) 

securing a member’s open account 

Clearing Fund indebtedness and 

establish concentration requirements 

with regard to their use; (2) create a 

correlating range of haircuts to be 

applied to these expanded types of 

Eligible Clearing Fund Securities; and 

(3) eliminate letters of credit as a 

generally acceptable form of collateral 

securing the member’s open account 

Clearing Fund indebtedness. 

A. Revised Clearing Fund Components 

(1) Cash 

The current Clearing Fund minimum 

cash deposit requirement will remain 

unchanged: Each member must 

contribute a minimum of $10,000 with 

the first forty percent but no less than 

$10,000 of a member’s Required Deposit 

being in cash.7

(2) Securities 

NSCC is replacing the term Qualifying 

Bonds 8 with a new set of definitions for 

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