26856 Federal Register / Vol. 72, No. 91 / Friday, May 11, 2007 / Notices 

Program; (2) delisted options series (for all strike 

price intervals) for all options selected for the Pilot 

Program; (3) an assessment of the appropriateness 

of $1 strike price intervals for the options ISE 

selected for the Pilot Program; (4) an assessment of 

the impact of the Pilot Program on the capacity of 

ISE’s, the Options Price Reporting Authority’s, and 

vendors’ automated systems; (5) any capacity 

problems or other problems that arose during the 

operation of the Pilot Program and how ISE 

addressed them; (6) any complaints that ISE 

received during the operation of the Pilot Program 

and how ISE addressed them; and (7) any 

additional information that would help to assess the 

operation of the Pilot Program. See Pilot Program 

Approval Order, supra note 5. 

12 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Rule 300(a) of Regulation ATS under the Act 

(defining ‘‘alternative trading system’’). 

4See Rule 600(b)(23) of Regulation NMS under 

the Act (defining ‘‘electronic communication 

network’’). 

5See Securities Exchange Act Release No. 45915 

(May 10, 2002), 67 FR 35171 (May 17, 2002) 

(approving SR–NASD–2001–44). 

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 

No. SR–ISE–2007–26 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 No. 

SR–ISE–2007–26. 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 will also be 

available for inspection and copying at 

the principal office of ISE. 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–ISE–2007–26 and should be 

submitted on or before June 1, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–9070 Filed 5–10–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55717; File No. SR–NASD–

2007–029] 

Self-Regulatory Organizations: 

National Association of Securities 

Dealers, Inc.; Notice of Filing of 

Proposed Rule Change Relating to 

Access Fee Display Requirements for 

the OTCBB 

May 7, 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 April 20, 

2007, the National Association of 

Securities Dealers, Inc. (‘‘NASD’’) 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 substantially prepared by 

NASD. 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 is proposing to amend NASD 

Rule 6540(c) to exclude from the access 

fee display requirements access fees 

below a specified level. 

Below is the text of the proposed rule 

change. Proposed new language is in 

italics; proposed deletions are in 

brackets. 

* * * * * 

6540. Requirements Applicable to 

Market Makers 

(a) through (b) No Change. 

(c) A participating ATS or ECN shall 

reflect non-subscriber access or posttransaction fees in its published 

quotation [the ATS’s or ECN’s posted 

quoted] in the OTC Bulletin Board 

montage if: 

(1) The published quotation is priced 

equal to or greater than $1.00 and such 

fees exceed or accumulate to more than 

$0.003 per share; or 

(2) The published quotation is less 

than $1.00 and such fees exceed or 

accumulate to more than 0.3% of the 

published quotation price on a per 

share basis. 

(d) through (e) No Change. 

* * * * * 

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 

NASD Rule 6540(c) requires an 

alternative trading system (‘‘ATS’’) 3 or 

electronic communications network 

(‘‘ECN’’) 4 to reflect non-subscriber 

access or post-transaction fees in its 

posted quotation in the OTC Bulletin 

Board (‘‘OTCBB’’). NASD established 

the requirements in Rule 6540(c) to 

permit ATSs and ECNs to participate in 

the OTCBB in the same way that market 

makers participate.5 Specifically, 

because a market maker does not charge 

access or post-transaction fees over and 

above its posted quotation, a 

participating ATS or ECN is prohibited 

from charging such fees, unless such 

fees are incorporated in the ATS’s or 

ECN’s posted quotation. Concerns have 


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Federal Register / Vol. 72, No. 91 / Friday, May 11, 2007 / Notices 26857 

6The term ‘‘non-exchange-listed security’’ means 

any equity security that is not traded on any 

national securities exchange and does not include 

a ‘‘restricted security,’’ as defined by Commission 

Rule 144(a)(3) under the Securities Act of 1933, nor 

any security designated in the PORTAL Market, the 

Rule 6700 Series. See NASD Rule 6610(c). 

7The term ‘‘quotation medium’’ means any interdealer quotation system or any publication or 

electronic communications network or other device 

that is used by brokers or dealers to make known 

to others their interest in transactions in any 

security, including offers to buy or sell at a stated 

price or otherwise, or invitations of offers to buy or 

sell. See NASD Rule 2320(g)(4). The term quotation 

medium includes, without limitation, the OTCBB, 

the Electronic Pink Sheets, an ATS, and an ECN. 

8See Securities Exchange Act Release No. 43319 

(September 21, 2000), 65 FR 58589 (September 29, 

2000) (approving SR–NASD–00–20). 

9See id. 

10See Securities Exchange Act Release No. 53024 

(December 27, 2005), 71 FR 159 (January 3, 2006) 

(notice of filing of proposed rule change and 

Amendment No. 2 to SR–NASD–2005–095). 

11The specified levels in this proposed rule 

change correspond to the access fees limits set forth 

in Rule 610(c) of Regulation NMS under the Act. 

Rule 610(c) of Regulation NMS, among other 

provisions, generally limits the fees that any trading 

center can charge (or allow to be charged) for 

accessing its protected quotation in an NMS stock 

priced equal to or greater than $1.00 per share to 

no more than $0.003 per share. If the price of a 

protected quotation is less than $1.00 per share, the 

fee cannot exceed 0.3% of the quotation price. See 

Securities Exchange Act Release No. 51808 (June 9, 

2005), 70 FR 37496 (June 29, 2005) (Regulation 

NMS Adopting Release). 

12 15 U.S.C. 78o–3(b)(6). 

13See Letter from Andrew B. Stevens, Assistant 

General Counsel, NYSE Group, Inc., and Greg 

O’Connor, Director of Compliance, Archipelago 

Trading Services, Inc., to Nancy M. Morris, 

Secretary, Commission, dated February 14, 2007; 

Letter from Julian Rainero, on behalf of Pershing 

LLC, to Nancy M. Morris, Secretary, Commission, 

dated March 6, 2006; Letter from Patrick E. Brake, 

Jr., General Counsel, Hill, Thompson, Magid & Co., 

Inc., to Nancy M. Morris, Secretary, Commission, 

dated February 21, 2006; Letter from Jerry 

O’Connell, Chairman, Trading Committee, 

Securities Industry Association, to Nancy M. 

Morris, Secretary, Commission, dated February 17, 

2006; Letter from William Yancey, Chairman, and 

John C. Giesea, President and Chief Executive 

Officer, Security Traders Association, to Nancy M. 

Morris, Secretary, Commission, dated February 8, 

2006; Letter from R. Cromwell Coulson, Chief 

Executive Officer, Pink Sheets LLC, to Nancy M. 

Morris, Secretary, Commission, dated January 26, 

2006; Letter from Phylis M. Esposito, Executive 

Vice President, Chief Strategy Officer, Ameritrade, 

Inc., to Nancy M. Morris, Secretary, Commission, 

dated January 24, 2006; Letter from Leonard J. 

Amoruso, Knight Capital Group, Inc., to Nancy M. 

Morris, Secretary, Commission, dated January 24, 

2006; Letter from Michael Santucci, President, 

Kimberly Unger, Executive Director, and Stephen J. 

Nelson, Co-Chair, Security Traders Association of 

New York, Inc., to Nancy M. Morris, Secretary, 

Commission, dated January 24, 2006; Letter from 

Phylis M. Esposito, Executive Vice President, Chief 

Strategy Officer, Ameritrade, Inc., to Nancy M. 

Morris, Secretary, Commission, dated October 31, 

2005; and Letter from Kevin J. P. O’Hara, Chief 

Administrative Officer & General Counsel, 

Archipelago Trading Services, Inc., to Nancy M. 

Continued 

been raised about the practical 

difficulties of complying with Rule 

6540(c) for ATSs and ECNs that choose 

to charge such fees. 

First, NASD Rule 2320(g)(2) requires 

a member that displays priced 

quotations for the same non-exchangelisted security 6 in two or more 

quotation mediums 7 that permit 

quotation updates on a real-time basis to 

display the same priced quotation in 

each system. NASD established this 

requirement because members that 

display differently priced quotations in 

different quotation mediums for the 

same security can be confusing and 

misleading to other market participants 

and, more importantly, to public 

investors.8 Moreover, NASD believes 

that requiring that members display 

consistently priced quotations in 

multiple quotation mediums enhances 

the ability of other market participants 

to ascertain the best inter-dealer market 

for a security.9

Rule 2320(g)(2), in conjunction with 

Rule 6540(c), results in certain 

unintended consequences. Specifically, 

the effect of these rules is to require an 

ATS or ECN that charges an access fee 

to incorporate such access fee in its 

internal system quotation, 

notwithstanding the fact that internal 

subscribers of such system will not be 

charged that fee. NASD does not believe 

such a result furthers the goals of Rule 

2320(g)(2) or Rule 6540(c). 

Second, by requiring an ATS or ECN 

to incorporate its access fee in its quote, 

the ATS or ECN may be forced to effect 

two trades at different prices rather than 

one trade at a single price: (1) The 

transaction with the subscriber that 

placed the original limit order at the 

limit order price, with no access fee 

charged; and (2) the transaction with the 

non-subscriber at the quoted price 

inclusive of the access fee charged to the 

non-subscriber. This has the unintended 

consequence of requiring two separate 

trade reports to the tape at each price for 

what previously was reportable as one 

trade and may also require the ATS or 

ECN to trade on a principal basis to 

effectuate the trade. 

In a prior rule filing (SR–NASD–

2005–095) relating to restrictions on 

sub-penny quoting that was later 

withdrawn, NASD had proposed to 

eliminate Rule 6540(c), primarily 

because it was in direct conflict with the 

proposed sub-penny quotation 

restriction, given that most access fees 

are in sub-penny increments.10 In the 

context of that filing, several 

commenters opposed the proposed 

elimination of the requirements in Rule 

6540(c), generally raising concerns that 

such elimination would lead to hidden 

and unregulated access fees because the 

deletion of Rule 6540(c) eliminates the 

practical disincentive to charge 

excessive fees. 

In response to both the concerns 

raised regarding the practical difficulties 

with compliance with Rule 6540(c) and 

that ATSs and ECNs might charge 

hidden and excessive access fees, NASD 

is proposing to amend Rule 6540(c) to 

exclude from the requirements only 

those access fees that are less than or 

equal to $0.003 per share (or 0.3% of the 

published quotation price on a per-share 

basis in the case of published quotations 

below $1.00 per share).11 NASD 

believes this approach addresses the 

practical difficulties with incorporating 

the access fee in a quotation, while also 

addressing the concerns relating to 

possible excessive access fees raised by 

commenters in response to proposed 

rule change SR–NASD–2005–095. 

In addition, NASD is proposing a nonsubstantive change to replace the term 

‘‘posted quote’’ with the term 

‘‘published quotation.’’ As noted above, 

the effective date of the proposed rule 

change would be the date of 

Commission approval. NASD would 

publish a Notice to Members 

announcing Commission approval no 

later than 30 days following any such 

approval. 

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 

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 a reasonable means to ensure 

that access fees over a specified level are 

transparent to the marketplace. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

NASD does not believe that the 

proposed rule change would 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. However, as 

noted previously, the Commission 

published for comment proposed rule 

change SR–NASD–2005–095 and 

several comments concerning access 

fees were received.13 The comments are 

summarized above. 


ycherry on PROD1PC64 with NOTICES
26858 Federal Register / Vol. 72, No. 91 / Friday, May 11, 2007 / Notices 

Morris, Secretary, Commission, dated September 

23, 2005. 

14 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(7). 

2 17 CFR 240.19b–7. 

3 15 U.S.C. 78o–3(k). 

4 15 U.S.C. 78o(b)(11). 

5The Interpretive Notice currently provides that 

Member firms triggering the enhanced supervisory 

procedures must record all telephone conversations 

between the Member’s APs and both existing and 

potential customers, submit all promotional 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 35 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

A. By order approve such proposed 

rule change, or 

B. Institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

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–2007–029 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–2007–029. 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 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 File 

Number SR–NASD–2007–029 and 

should be submitted on or before June 

1, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–9069 Filed 5–10–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55710; File No. SR–NFA–

2007–03] 

Self-Regulatory Organization; National 

Futures Association; Notice of Filing 

and Immediate Effectiveness of 

Proposed Amendments to Compliance 

Rule 2–9 (Supervision) and the 

Interpretive Notice Regarding 

Compliance Rule 2–9 (Enhanced 

Supervisory Requirements) 

May 4, 2007. 

Pursuant to Section 19(b)(7) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–7 thereunder,2

notice is hereby given that on February 

28, 2007, National Futures Association 

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

Exchange Commission (‘‘Commission’’) 

the proposed rule change described in 

Items I, II, and III below, which Items 

have been substantially prepared by 

NFA. The Commission is publishing 

this notice to solicit comments on the 

proposed rule change from interested 

persons. NFA, on February 27, 2007, 

submitted the proposed rule change to 

the Commodity Futures Trading 

Commission (‘‘CFTC’’) for approval. The 

CFTC approved the proposed rule 

change on March 28, 2007. 

I. Self-Regulatory Organization’s 

Description of the Proposed Rules 

Section 15A(k) of the Act 3 makes 

NFA a national securities association for 

the limited purpose of regulating the 

activities of NFA members (‘‘Members’’) 

who are registered as brokers or dealers 

in security futures products under 

Section 15(b)(11) of the Exchange Act.4

NFA’s Interpretive Notice entitled 

‘‘Compliance Rule 2–9: Enhanced 

Supervisory Requirements’’

(‘‘Interpretive Notice’’) applies to all 

Members who meet the criteria in the 

Interpretive Notice and could apply to 

Members registered under Section 

15(b)(11). 

The amendments to the Interpretive 

Notice: 

• Expand the definition of a 

Disciplined Firm to include firms that 

have been sanctioned by the CFTC or 

NFA during the preceding five years for 

using deceptive telemarketing practices 

or promotional material, even if the firm 

was not barred from the industry; and 

• Impose the enhanced supervisory 

requirements on firms that charge 50% 

or more of their customers round-turn 

commissions, fees, and other charges 

that total $100 or more per futures, 

forex, or option contract. 

The amendment to Compliance Rule 

2–9(b) adds language specifically 

authorizing NFA’s Board to establish 

criteria related to the employment 

history of a Member’s principals and/or 

to the amount of commissions, fees, and 

other charges assessed by a Member 

when imposing the enhanced 

supervisory requirements on a Member. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rules 

NFA has prepared statements 

concerning the purpose of, and basis for, 

the proposed rule change, burdens on 

competition, and comments received 

from members, participants, and others. 

The text of these statements may be 

examined at the places specified in Item 

IV below. These statements are set forth 

in Sections A, B, and C below. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rules 

1. Purpose 

NFA’s Board of Directors adopted the 

original Interpretive Notice in January 

1993. The Interpretive Notice requires a 

Member to undertake specific enhanced 

supervisory requirements if its sales 

force includes a specified number of 

individuals who have worked at 

Disciplined Firms or, in certain 

situations, when a Member becomes 

subject to a disciplinary action.5 The 


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