14850 Federal Register / Vol. 77, No. 49 / Tuesday, March 13, 2012 / Notices 

12 15 U.S.C. 78s(b)(2). 13 In approving this rule change, 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). 

14 15 U.S.C. 78o–3(b)(6). 

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

16 15 U.S.C. 78s(b)(2). 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 59955 

(May 22, 2009), 74 FR 25586 (May 28, 2009) (Notice 

of Filing and Order Granting Accelerated Approval 

of Proposed Rule Change, as Modified by 

Amendment No. 1 [File No. SR–FINRA–2009–012]) 

(‘‘Approval Order’’). 

All submissions should refer to File 

Number SR–FINRA–2012–014. This file 

number should be included on the 

subject line if email 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 Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10 a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of 

FINRA. 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–FINRA–2012–014 and 

should be submitted on or before April 

3, 2012. 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of a 

Proposed Rule Change 

FINRA has requested that the 

Commission find good cause pursuant 

to Section 19(b)(2) of the Act for 

approving the proposed rule change 

prior to the 30th day after publication in 

the Federal Register.12 After careful 

consideration, 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 association.13

In particular, the Commission finds 

that the proposed rule change is 

consistent with Section 15A(b)(6) of the 

Act, which requires, among other 

things, that FINRA 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.14 The accelerated 

approval will, consistent with the goals 

set forth by the Commission when it 

adopted the interim final temporary 

rules with respect to the operation of 

central counterparties to clear and settle 

CDS, and pending the final 

implementation of new CFTC and SEC 

rules pursuant to Title VII of the DoddFrank Act, help to stabilize the financial 

markets by setting forth margin 

requirements for certain transactions in 

CDS. 

The Commission also finds good 

cause, pursuant to Section 19(b)(2) of 

the Act,15 for approving the proposed 

rule change prior to the 30th day after 

the date of publication of notice in the 

Federal Register. This accelerated 

approval will allow the existing pilot 

program to be effective retroactively to 

January 17, 2012, and extended through 

July 17, 2012, to permit the pilot 

program to continue without 

interruption and extend the benefits of 

a pilot program that the Commission has 

previously approved and extended. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,16 that the 

proposed rule change (SR–FINRA– 

2012–014), be, and it hereby is, 

approved on an accelerated basis to July 

17, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–5986 Filed 3–12–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66527; File No. SR–FINRA– 

2012–015] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Order Granting Accelerated Approval 

of Proposed Rule Change To Amend 

FINRA Rule 4240 (Margin 

Requirements for Credit Default 

Swaps) 

March 7, 2012. 

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 February 

23, 2012, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) filed with the 

Securities and Exchange Commission 

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

rule change as described in Items I and 

II, below, which Items have been 

substantially prepared by FINRA. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. For the 

reasons discussed below, the 

Commission is granting accelerated 

approval of the proposed rule change. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to amend FINRA 

Rule 4240 (Margin Requirements for 

Credit Default Swaps) to limit the 

application of the rule at this time to 

certain transactions in credit default 

swaps that are security-based swaps and 

to make other revisions to update the 

rule. FINRA Rule 4240 implements an 

interim pilot program with respect to 

margin requirements for certain 

transactions in credit default swaps. 

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA 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, 

FINRA 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. FINRA 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 May 22, 2009, the Commission 

approved FINRA Rule 4240,3 which 

implements an interim pilot program 

(‘‘Interim Pilot Program’’) with respect 

to margin requirements for certain 

transactions in credit default swaps 

(‘‘CDS’’). FINRA has filed a proposed 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 49 / Tuesday, March 13, 2012 / Notices 14851 

4See SR–FINRA–2012–014. 

5See 74 FR 25588 through 25589. 

6 In early 2009, the Commission enacted interim 

final temporary rules providing enumerated 

exemptions under the federal securities laws for 

certain CDS to facilitate the operation of one or 

more central clearing counterparties in such CDS. 

See Securities Act Release No. 8999 (January 14, 

2009), 74 FR 3967 (January 22, 2009) (Temporary 

Exemptions for Eligible Credit Default Swaps To 

Facilitate Operation of Central Counterparties To 

Clear and Settle Credit Default Swaps); Securities 

Act Release No. 9063 (September 14, 2009), 74 FR 

47719 (September 17, 2009) (Extension of 

Temporary Exemptions for Eligible Credit Default 

Swaps to Facilitate Operation of Central 

Counterparties to Clear and Settle Credit Default 

Swaps); Securities Act Release No. 9158 (November 

19, 2010), 75 FR 72660 (November 26, 2010) 

(Extension of Temporary Exemptions for Eligible 

Credit Default Swaps to Facilitate Operation of 

Central Counterparties to Clear and Settle Credit 

Default Swaps). See also Securities Exchange Act 

Release No. 59578 (March 13, 2009), 74 FR 11781 

(March 19, 2009) (Order Granting Temporary 

Exemptions in Connection with Request of Chicago 

Mercantile Exchange Inc. and Citadel Investment 

Group, L.L.C. Related to Central Clearing of Credit 

Default Swaps, and Request for Comments); 

Securities Exchange Act Release No. 59165 

(December 24, 2008), 74 FR 133 (January 2, 2009) 

(Order Pursuant to Section 36 of the Securities 

Exchange Act of 1934 Granting Temporary 

Exemptions from Sections 5 and 6 of the Exchange 

Act for Broker-Dealers and Exchanges Effecting 

Transactions in Credit Default Swaps). 

7Public Law 111–203, 124 Stat. 1376 (2010). 

8The terms ‘‘swap’’ and ‘‘security-based swap’’ 

are defined in Sections 721 and 761 of the DoddFrank Act. The Commission and the CFTC jointly 

have proposed to further define these terms. See 

Securities Exchange Act Release No. 64372 (Apr. 

29, 2011), 76 FR 29818 (May 23, 2011) (Further 

Definition of ‘‘Swap,’’ ‘‘Security-Based Swap,’’ and 

‘‘Security-Based Swap Agreement’’; Mixed Swaps; 

Security-Based Swap Agreement Recordkeeping); 

Securities Exchange Act Release No. 63452 (Dec. 7, 

2010), 75 FR 80174 (Dec. 21, 2010) (Further 

Definition of ‘‘Swap Dealer,’’ ‘‘Security-Based Swap 

Dealer,’’ ‘‘Major Swap Participant,’’ ‘‘Major 

Security-Based Swap Participant’’ and ‘‘Eligible 

Contract Participant’’). 

9See supra note 4. 

10 15 U.S.C. 78c(a)(68). 

11 7 U.S.C. 1a(47). 

12See Exhibit 5 attached to SR–FINRA–2012–015. 

See also supra note 8. 

13 15 U.S.C. 78s(b)(2). 

14 15 U.S.C. 78o–3(b)(6). 

rule change to extend the 

implementation of Rule 4240 to July 17, 

2012.4

As explained in the Approval Order,5

FINRA Rule 4240, coterminous with 

certain Commission actions,6 is 

intended to address concerns arising 

from counterparty credit risk posed by 

CDS, including, among other things, 

risks to the financial system arising from 

credit risk resulting from bilateral CDS 

transactions and from a concentration of 

credit risk to a central counterparty that 

clears and settles CDS. On July 21, 2010, 

President Obama signed into law the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (‘‘Dodd-Frank 

Act’’),7 Title VII of which established a 

comprehensive new regulatory 

framework for swaps and security-based 

swaps,8 including certain CDS. The new 

legislation was intended among other 

things to enhance the authority of 

regulators to implement new rules 

designed to reduce risk, increase 

transparency, and promote market 

integrity with respect to such products. 

As noted earlier, FINRA has filed a 

proposed rule change to extend the 

implementation of FINRA Rule 4240 to 

July 17, 2012.9 In this filing, FINRA is 

proposing to make certain revisions to 

FINRA Rule 4240 in light of the 

continuing development of the CDS 

business within the framework of the 

Dodd-Frank Act. 

Specifically, FINRA is limiting the 

application of FINRA Rule 4240 at this 

time to CDS that are security-based 

swaps under Section 3(a)(68) of the 

Act,10 pending further development of 

federal regulations governing margin for 

swaps and security-based swaps and 

further consideration of potential 

portfolio margin methodologies for 

cleared CDS that include both swaps 

and security-based swaps. Based on 

these factors, FINRA may propose to 

extend FINRA Rule 4240 to encompass 

CDS that are swaps under Section 1a(47) 

of the Commodity Exchange Act 11 at a 

later date. 

Accordingly, FINRA is revising the 

definition of ‘‘CDS’’ set forth in 

paragraph (a) of FINRA Rule 4240 to 

provide that, for purposes of the rule, 

the term CDS includes any product that 

is commonly known to the trade as a 

credit default swap and is a securitybased swap as defined pursuant to 

Section 3(a)(68) of the Act or the rules 

and guidance of the SEC and its staff.12

Consistent with this change, FINRA is 

eliminating the grid set forth under 

paragraph (a) of FINRA Rule 4240.01 as 

to CDS contracts where the underlying 

obligation is a debt index rather than a 

single name bond, because such grid is 

for broad-based indexes. As revised, the 

rule provides that with respect to CDS 

contracts where the underlying 

obligation is a narrow-based debt index, 

rather than a single name bond, the 

margin requirement shall be based upon 

a margin methodology using the 

member’s internal models the use of 

which has been approved by FINRA. In 

addition, FINRA is revising paragraphs 

(a), (b) and (c)(1) of the rule to remove 

references to derivatives clearing 

organizations. 

Further, in the interest of regulatory 

clarity and efficiency, and based upon 

FINRA’s experience in the 

administration of the rule, FINRA has 

revised the grid set forth under FINRA 

Rule 4240.01(a) as to CDS contracts 

where the underlying obligation is a 

single name debt security. Specifically, 

the revised grid sets forth more 

calibrated ranges with respect to the 

length of time to maturity of the relevant 

CDS contract and percentages with 

respect to the required margin. 

FINRA has made minor edits to 

paragraph (e) of the rule to align the 

terms ‘‘current exposure’’ and 

‘‘maximum potential exposure’’ with 

the definitions set forth in Act Rule 

15c3–1e(c)(4) and to make other minor 

clarifications. In addition, in the interest 

of clarification, FINRA has replaced 

references to use of an ‘‘approved 

margin methodology’’ in paragraphs (a), 

(c)(1) and (c)(2) of the rule with ‘‘using’’ 

or ‘‘use’’ a ‘‘margin methodology the use 

of which has been approved by FINRA 

as announced in a Regulatory Notice.’’ 

Lastly, FINRA has made clarifying 

edits to paragraph (c) of Supplementary 

Material .01 to provide that in instances 

where the customer or broker-dealer 

maintains both long and short CDS, the 

member may elect to collect 50% of the 

relevant margin requirements on the 

lesser of the long or short position 

within the same Bloomberg CDS sector 

(or, if the long and short positions are 

equal, the long position), provided those 

long and short positions are in the same 

spread and maturity bucket, plus the 

relevant margin requirements on the 

excess long or short position, if any. 

The proposed rule change will 

become effective upon approval by the 

SEC. FINRA has requested the 

Commission to find good cause 

pursuant to Section 19(b)(2) of the Act 13

for approving the proposed rule change 

prior to the 30th day after its 

publication in the Federal Register. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,14 which 

requires, among other things, that 

FINRA 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. FINRA believes that the 

proposed rule change will further the 

purposes of the Act because, consistent 

with the goals set forth by the 

Commission when it adopted the 

interim final temporary rules with 

respect to the operation of central 

counterparties to clear and settle CDS, 

and pending the final implementation of 

new CFTC and SEC rules pursuant to 

Title VII of the Dodd-Frank Act, the 

margin requirements set forth by the 

mstockstill on DSK4VPTVN1PROD with NOTICES

14852 Federal Register / Vol. 77, No. 49 / Tuesday, March 13, 2012 / Notices 

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

16 In approving this rule change, 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). 

17 15 U.S.C. 78o–3(b)(6). 

18 15 U.S.C. 78c(a)(68). 

19Public Law 111–203, 124 Stat. 1376 (2010). 

20 15 U.S.C. 78(b)(2). 

21 15 U.S.C. 78(b)(2). 

22 17 CFR 200.30–3(a)(12). 

proposed rule change will help to 

stabilize the financial markets. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA 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. 

III. 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 email to rulecomments@sec.gov. Please include File 

Number SR–FINRA–2012–015 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2012–015. This file 

number should be included on the 

subject line if email 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 Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10 a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of 

FINRA. 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–FINRA–2012–015 and 

should be submitted on or before April 

3, 2012. 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of a 

Proposed Rule Change 

FINRA has requested that the 

Commission find good cause pursuant 

to Section 19(b)(2) of the Act for 

approving the proposed rule change 

prior to the 30th day after publication in 

the Federal Register.15 After careful 

consideration, 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 association.16

In particular, the Commission finds 

that the proposed rule change is 

consistent with Section 15A(b)(6) of the 

Act, which requires, among other 

things, that FINRA 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.17 Specifically, as noted 

above, FINRA is limiting the application 

of FINRA Rule 4240 at this time to CDS 

that are security-based swaps under 

Section 3(a)(68) of the Act,18 pending 

further development of federal 

regulations governing margin for swaps 

and security-based swaps and further 

consideration of potential portfolio 

margin methodologies for cleared CDS 

that include both swaps and securitybased swaps. This is consistent with the 

goals of Title VII of the Dodd-Frank 

Act.19 In addition, the Commission 

believes that the proposed alternative 

tables that may be used by market 

participants to compute the required 

margin will provide market participants 

with some flexibility in computing 

margin, while still permitting the 

continued use of the existing margin 

tables in FINRA Rule 4240 

Supplementary Material .01. 

The accelerated approval will, 

consistent with the goals set forth by the 

Commission when it adopted the 

interim final temporary rules with 

respect to the operation of central 

counterparties to clear and settle CDS, 

and pending the final implementation of 

new CFTC and SEC rules pursuant to 

Title VII of the Dodd-Frank Act, help to 

stabilize the financial markets by setting 

forth margin requirements for certain 

transactions in CDS. Therefore, the 

Commission finds good cause, pursuant 

to Section 19(b)(2) of the Act, for 

approving the proposed rule change 

prior to the 30th day after the date of 

publication of note in the Federal 

Register.20

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,21 that the 

proposed rule change (SR–FINRA– 

2012–015) be, and hereby is, approved 

on an accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.22

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–5985 Filed 3–12–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[File No. 500–1] 

Advanced Growing Systems, Inc., 

Advantage Capital Development Corp., 

Amazon Biotech, Inc., Andover 

Holdings, Inc. a/k/a Andover Energy 

Holdings, Inc., Bravo! Brands, Inc., and 

BSML, Inc., Order of Suspension of 

Trading 

March 9, 2012. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Advanced 

Growing Systems, Inc. because it has 

not filed any periodic reports since the 

period ended June 30, 2009. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Advantage 

Capital Development Corp. because it 

has not filed any periodic reports since 

the period ended December 31, 2006. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Amazon 

mstockstill on DSK4VPTVN1PROD with NOTICES