Federal Register / Vol. 72, No. 98 / Tuesday, May 22, 2007 / Notices 28741 

15 In approving this rule change, the Commission 

notes that it has considered the proposal’s impact 

on efficiency, competition, and capital formation. 

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

16 15 U.S.C. 78f(b)(5). 17 15 U.S.C. 78l(f). 

18Section 12(a) of the Act, 15 U.S.C. 78l(a), 

generally prohibits a broker-dealer from trading a 

security on a national securities exchange unless 

the security is registered on that exchange pursuant 

to Section 12 of the Act. Section 12(f) of the Act 

excludes from this restriction trading in any 

security to which an exchange ‘‘extends UTP.’’

When an exchange extends UTP to a security, it 

allows its members to trade the security as if it were 

listed and registered on the exchange even though 

it is not so listed and registered. 

19See Amex Order, supra note 7. 

20 17 CFR 240.12f–5. 

21 15 U.S.C. 78k–1(a)(1)(C)(iii). 22 15 U.S.C. 78s(b)(2). 

23 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)(i). 

4 17 CFR 240.19b–4(f)(1). 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of the 

Proposed Rule Change 

The Commission finds that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to a national securities 

exchange.15 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,16 which requires that 

an exchange have rules designed, among 

other things, 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 Commission 

believes that this proposal should 

benefit investors by increasing 

competition among markets that trade 

the Units. 

In addition, the Commission finds 

that the proposal is consistent with 

Section 12(f) of the Act,17 which permits 

an exchange to trade, pursuant to UTP, 

a security that is listed and registered on 

another exchange.18 The Commission 

notes that it previously approved the 

listing and trading of the Units on 

Amex.19 The Commission also finds that 

the proposal is consistent with Rule 

12f–5 under the Act,20 which provides 

that an exchange shall not extend UTP 

to a security unless the exchange has in 

effect a rule or rules providing for 

transactions in the class or type of 

security to which the exchange extends 

UTP. The Exchange has represented that 

it meets this requirement because it 

deems the Units to be equity securities, 

thus rendering trading in the Units 

subject to the Exchange’s existing rules 

governing the trading of equity 

securities. 

The Commission further believes that 

the proposal is consistent with Section 

11A(a)(1)(C)(iii) of the Act,21 which sets 

forth Congress’ finding that it is in the 

public interest and appropriate for the 

protection of investors and the 

maintenance of fair and orderly markets 

to assure the availability to brokers, 

dealers, and investors of information 

with respect to quotations for and 

transactions in securities. 

In support of this proposal, the 

Exchange represents that its 

surveillance procedures are adequate to 

properly monitor the trading of the 

Units on the Exchange. In addition, the 

Exchange represents that it is party to 

Information Sharing Agreements with 

NYMEX and ICE Futures for the 

purpose of providing information in 

connection with trading in or related to 

oil futures contracts traded on those 

markets, and that, to the extent that 

USOF invests in oil interests traded on 

other exchanges, the Exchange would 

enter into information sharing 

agreements, acceptable to the 

Commission staff, with those particular 

exchanges. This approval order is 

conditioned on the Exchange’s 

adherence to these representations. 

The Commission finds good cause for 

approving this proposal before the 

thirtieth day after the publication of 

notice thereof in the Federal Register. 

As noted previously, the Commission 

previously found that the listing and 

trading of the Units by Amex is 

consistent with the Act. In addition, the 

Commission previously found that the 

trading of the Units by Nasdaq pursuant 

to UTP on a three-month pilot basis was 

consistent with the Act. The 

Commission presently is not aware of 

any regulatory issue that should cause it 

to revisit these earlier findings or would 

preclude the trading of the Units on the 

Exchange pursuant to UTP. Therefore, 

accelerating approval of this proposed 

rule change should benefit investors by 

creating, without undue delay, 

additional competition in the market for 

the Units. For these reasons, the 

Commission finds good cause to 

approve the amended proposal on an 

accelerated basis. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,22 that the 

proposed rule change (SR–NASDAQ–

2007–045), as modified by Amendment 

No. 1, be, and it hereby is, approved on 

an accelerated basis. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.23

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. E7–9740 Filed 5–21–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55759; File No. SR–NASD–

2007–032] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Regarding NASD’s 

Exemptive Authority Relating to 

Regulation NMS Trade Reporting 

Requirements 

May 15, 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 May 10, 

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. NASD has designated this 

proposal as one constituting a stated 

policy, practice, or interpretation with 

respect to the meaning, administration, 

or enforcement of an existing rule under 

Section 19(b)(3)(A)(i) of the Act 3 and 

Rule 19b–4(f)(1) thereunder,4 which 

renders it 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 is proposing to adopt new 

NASD Rule 5150 to provide NASD with 

authority to exempt members from 

certain new NASD trade reporting 

requirements for the Alternative Display 

Facility (‘‘ADF’’) and the NASD Trade 

Reporting Facilities (‘‘TRFs’’) relating to 

Regulation NMS. The text of the 

proposed rule change is available at 

NASD, the Commission’s Public 

Reference Room, and http:// 

www.nasd.com. 


jlentini on PROD1PC65 with NOTICES
28742 Federal Register / Vol. 72, No. 98 / Tuesday, May 22, 2007 / Notices 

5See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496 (June 29, 2005). 

6NMS stock is defined in Rule 600(b)(47) of 

Regulation NMS as ‘‘any NMS security other than 

an option.’’ Rule 600(b)(46) of Regulation NMS 

defines NMS security as ‘‘any security or class of 

securities for which transaction reports are 

collected, processed, and made available pursuant 

to an effective transaction reporting plan, or an 

effective national market system plan for reporting 

transactions in listed options.’’

7See 17 CFR 242.611; Securities Exchange Act 

Release Nos. 54389 (August 31, 2006), 71 FR 52829 

(September 7, 2006) (Order Granting an Exemption 

for Qualified Contingent Trades from Rule 611(a) of 

Regulation NMS) and 54678 (October 31, 2006), 71 

FR 65018 (November 6, 2006) (Order Exempting 

Certain Sub-Penny Trade-Throughs from Rule 611 

of Regulation NMS). 

8 It should be noted that while NASD is not a 

trading center, market participants that quote in 

NMS stocks in the ADF are trading centers. 

9See generally, Securities Exchange Act Release 

Nos. 54537 (September 28, 2006), 71 FR 59173 

(October 6, 2006) (SR–NASD–2006–091, amending 

ADF rules); 55088 (January 11, 2007), 72 FR 2573 

(January 19, 2007) (SR–NASD–2007–001, amending 

ADF rules); 55101 (January 12, 2007), 72 FR 2568 

(January 19, 2007) (SR–NASD–2007–002, amending 

NASD/Nasdaq TRF rules); and 55346 (February 26, 

2007), 72 FR 9807 (March 5, 2007) (SR–NASD–

2007–014, amending NASD/NSX TRF rules, NASD/ 

BSE TRF rules, and NASD/NYSE TRF rules). 

10Members may submit trade reports to the TRFs 

in compliance with the Regulation NMS 

requirements on a voluntary basis prior to the Pilot 

Stocks Phase Date. 

11See letter from Manisha Kimmel, Executive 

Director, FIF, on behalf of the FIF Regulation NMS 

Working Group, to Nancy M. Morris, Secretary, 

Commission, dated February 7, 2007, submitted in 

response to SR–NASD–2007–002 (‘‘FIF Letter’’). 

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 

On June 29, 2005, the Commission 

published its release adopting 

Regulation NMS,5 which established 

new substantive rules designed to 

modernize and strengthen the regulatory 

structure of the U.S. equities markets. 

Pursuant to Regulation NMS, the 

Commission, among other things, 

adopted Rule 611 (‘‘Order Protection 

Rule’’) to establish protection against 

trade-throughs for NMS stocks.6 There 

currently are nine exceptions and two 

exemptions to the Order Protection 

Rule.7

NASD does not qualify as a trading 

center within the meaning of Regulation 

NMS.8 However, NASD has a 

responsibility to enforce requirements 

under the Act that apply to activity 

within its regulatory authority. Unlike 

exchanges that have direct Regulation 

NMS obligations with respect to the 

self-regulatory organization trading 

facilities, NASD has indirect Regulation 

NMS obligations with respect to all 

over-the-counter market activity in NMS 

stocks, including post-trade regulation 

for compliance with the Order 

Protection Rule with respect to trading 

centers that trade report through the 

ADF or a TRF. 

Consistent with Regulation NMS, 

NASD amended its rules governing 

trade reporting to the ADF and TRFs to 

require reporting members to append 

applicable modifiers to last-sale 

transaction reports for trades that fall 

within Rule 611 exceptions and 

exemptions.9 The amendments to the 

ADF trade reporting rules (specifically, 

Rule 4632A) became operative on March 

5, 2007. The amendments to the trade 

reporting rules relating to the TRFs 

(specifically, Rules 4632, 4632C, 4632D, 

and 4632E) will become operative on 

the Regulation NMS Pilot Stocks Phase 

Date, which is scheduled to occur on 

July 9, 2007.10

The Financial Information Forum 

(‘‘FIF’’) submitted a comment letter in 

response to these rule changes.11 The 

FIF Letter states that implementation of 

the new NASD trade reporting modifiers 

relating to Regulation NMS (specifically, 

the self-help modifier, the qualified 

contingent trade modifier, the subpenny modifier, and the modifier used 

to distinguish between inbound and 

outbound intermarket sweep orders) 

will require additional development 

efforts and will present a challenge to 

certain member firms. The FIF Letter 

further asserts that implementation of 

the self-help modifiers in particular will 

be a time-consuming and costly effort 

and, without substantial development 

changes, some firms may be forced to 

not implement self-help to the 

detriment of their customers. Finally, 

the FIF Letter states that, if NASD 

determines that it must have this 

information for regulatory reasons, firms 

should be given more time to modify 

their systems and requests that the 

compliance date for the new trade 

report modifiers for purposes of 

reporting to a TRF be moved to the 

Regulation NMS Completion Date, 

which is currently anticipated to be 

October 8, 2007. 

In response to the FIF Letter and in 

recognition of the technological burdens 

that the new NASD trade report 

requirements may impose on some 

members, NASD is proposing to adopt 

new Rule 5150 to provide NASD with 

exemptive authority. Specifically, Rule 

5150 would allow members that are 

unable to complete necessary systems 

changes by the applicable compliance 

date to seek a temporary exemption 

from the new trade report requirements 

related to Regulation NMS found in 

Rules 4632, 4632A, 4632C, 4632D, and 

4632E. NASD will grant such an 

exemption only on a firm-by-firm basis, 

for good cause shown after taking into 

consideration all relevant factors and 

only if it is consistent with the 

protection of investors and the public 

interest. 

In general, the new trade reporting 

requirements provide critical 

information for purposes of NASD’s 

Regulation NMS regulatory program. As 

such, NASD does not intend to grant 

exemptions under the proposed rule 

except in exceptional circumstances and 

only where the requester has 

demonstrated that it has made best 

efforts to comply in a timely fashion 

with the new trade reporting 

requirements related to Regulation NMS 

and there is a specific, limited problem 

or issue preventing the member from 

achieving full compliance. A member 

requesting an exemption will be 

required, among other things, to: (1) 

Explain why it is unable to complete the 

necessary systems changes by the 

applicable compliance date; (2) identify 

the specific new Regulation NMSrelated trade reporting modifier(s) (e.g., 

self-help) that the firm is unable to 

implement in a timely manner; and (3) 

provide an estimated completion date 

for the outstanding systems work and 

full compliance. As set forth in the 

proposed rule, NASD will determine the 

duration of any exemption, which shall 

not exceed six months. Moreover, since 

concerns raised by the industry relate 

only to certain Regulation NMS-related 

trade modifiers (the self-help modifier, 

the qualified contingent trade modifier, 

the sub-penny modifier, and the 

modifier used to distinguish between 

inbound and outbound intermarket 

sweep orders), NASD will exercise 

exemptive authority under this rule 

proposal only to address 

implementation issues related to these 

particular modifiers. 

NASD intends to exercise the 

exemptive authority proposed herein on 

a temporary basis and, as such, the 

proposed rule change will automatically 


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 72, No. 98 / Tuesday, May 22, 2007 / Notices 28743 

12NASD is filing this proposed rule change for 

immediate effectiveness to allow NASD to address 

exemptive requests immediately without regard to 

when the changes to the underlying trade reporting 

rules are operational. 

13 15 U.S.C. 78o–3(b)(6). 

14See FIF Letter, supra note 11. 

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

16 17 CFR 240.19b–4(f)(1). 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Amendment No. 1 replaced and superseded the 

original rule filing in its entirety. 

sunset one year after the Pilot Stocks 

Phase Date, currently scheduled to 

occur on July 9, 2007. NASD has filed 

the proposed rule change for immediate 

effectiveness.12 The proposed rule 

change will become operative upon 

filing with the Commission. 

2. Statutory Basis 

NASD believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,13 which 

requires, among other things, that NASD 

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. NASD 

believes that the proposed exemptive 

authority is appropriate because it will 

allow NASD to address certain 

implementation issues as they arise. 

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 

While NASD did not solicit comments 

on the proposed rule change, as 

discussed above, NASD did receive a 

comment letter in connection with SR–

NASD–2007–002.14 NASD is filing the 

proposed rule change specifically to 

address this comment letter and the 

concerns raised by the commenter about 

the burdens associated with 

implementation of the new Regulation 

NMS-related trade report modifiers. As 

noted above, NASD has determined that 

the Regulation NMS-related modifiers 

required under the NASD trade 

reporting rules are crucial to its 

regulatory program and does not agree 

with the commenter that the self-help 

modifier should be optional. NASD 

believes that the proposed exemptive 

authority strikes a fair balance between 

the needs of NASD’s regulatory program 

and member concerns regarding the 

timing and burdens of the necessary 

systems changes. The proposed rule 

change should alleviate such burdens by 

affording members additional time, if 

needed, to make the necessary systems 

changes relating to the self-help 

modifier, the qualified contingent trade 

modifier, the sub-penny modifier, and 

the modifier used to distinguish 

inbound and outbound intermarket 

sweep orders. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing proposed rule change 

has become effective pursuant to 

Section 19(b)(3)(A)(i) of the Act 15 and 

subparagraph (f)(1) of Rule 19b–4 

thereunder,16 because it constitutes a 

stated policy, practice, or interpretation 

with respect to the meaning, 

administration, or enforcement of an 

existing rule. 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–2007–032 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–2007–032. 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 the 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–2007–032 and 

should be submitted on or before June 

12, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.17

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. E7–9741 Filed 5–21–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55765; File No. SR–NASD–

2006–044] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Notice of Filing of 

Proposed Rule Change and 

Amendment Nos. 1 and 2 Thereto 

Relating to Interpretive Material to 

NASD Rule 3060 To Require Members 

To Adopt Policies and Procedures 

Addressing Business Entertainment 

May 15, 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 11, 

2006, the National Association of 

Securities Dealers, Inc. (‘‘NASD’’) 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. On April 

17, 2007, NASD filed Amendment No. 

1 to the proposed rule change.3 On May 

1, 2007, NASD filed Partial Amendment 


jlentini on PROD1PC65 with NOTICES