10630 Federal Register / Vol. 74, No. 46 / Wednesday, March 11, 2009 / Notices 

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

4 17 CFR 240.19b–4(f)(2). 

5 17 CFR 200.30–3(a)(12). 

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

2CFR 240.19b–4. 

3 15 U.S.C. 77a et seq. 

4 17 CFR 230.144(a)(3). 

5 15 U.S.C. 77d(2). 

6 17 CFR 230.144A. 

among CBOE members and other 

persons using its facilities. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CBOE does not believe that the 

proposed rule change will impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of purposes of the Act. 

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 rule change 

establishes or changes a due, fee, or 

other charge imposed by the Exchange, 

it has become effective pursuant to 

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

subparagraph (f)(2) of Rule 19b–4 4

thereunder. 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–CBOE–2009–013 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–CBOE–2009–13. 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, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of the filing also will be available 

for inspection and copying at the 

principal office of the CBOE. 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–CBOE–2009–13 and should 

be submitted on or before April 1, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.5

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–5208 Filed 3–10–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59519; File No. SR— 

FINRA–2009–004] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change To Amend the 

Definition of TRACE-Eligible Security 

To Include Securities Eligible for 

Public Sale and Additional Securities 

That Are Restricted Securities 

March 5, 2009. 

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 

11, 2009, the Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’) 

(f/k/a 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 FINRA. 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 

FINRA is proposing to amend FINRA 

Rule 6710(a), the definition of ‘‘TRACEeligible security,’’ to broaden the 

definition by deleting (i) the 

requirement that a debt security be 

registered under the Securities Act of 

1933 (‘‘Securities Act’’); 3 and (ii) with 

respect to ‘‘restricted securities’’ as that 

term is defined in Securities Act Rule 

144(a)(3),4 the requirement that such 

securities be issued pursuant to 

Securities Act Section 4(2) 5 prior to 

being resold under Securities Act Rule 

144A.6

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 

FINRA proposes to amend Rule 

6710(a), the definition of ‘‘TRACEeligible security,’’ to eliminate two 

aspects of the requirement therein that 

such securities be ‘‘(1) registered under 

the Securities Act; or (2) issued 

pursuant to Section 4(2) of the 

Securities Act and purchased or sold 

pursuant to Securities Act Rule 144A.’’ 

The proposed rule change eliminates 


rwilkins on PROD1PC63 with NOTICES
Federal Register / Vol. 74, No. 46 / Wednesday, March 11, 2009 / Notices 10631 

7 15 U.S.C. 77a et seq. 

8Securities Act Rule 144(a)(3) (17 CFR 

230.144(a)(3)) defines ‘‘restricted securities’’ as: 

(i) Securities acquired directly or indirectly from 

the issuer, or from an affiliate of the issuer, in a 

transaction or a chain of transactions not involving 

any public offering; (ii) Securities acquired from the 

issuer that are subject to the resale limitations of 

§ 230.502(d) under Regulation D or § 230.701(c); 

(iii) Securities acquired in a transaction or chain of 

transactions meeting the requirements of 

§ 230.144A; (iv) Securities acquired from the issuer 

in a transaction subject to the conditions of 

Regulation CE (§ 230.1001); (v) * * * ; (vi) 

Securities acquired in a transaction made under 

§ 230.801 in the same extent and proportion that the 

securities held by the security holder of the class 

with respect to which the rights offering was made 

were, as of the record date for the rights offering, 

‘‘restricted securities’’ within the meaning of this 

paragraph (a)(3); (vii) Securities acquired in a 

transaction made under § 230.802 to the same 

extent and proportion that the securities that were 

tendered or exchanged in the exchange offer or 

business combination were ‘‘restricted securities’’ 

within the meaning of this paragraph (a)(3); and 

(viii) Securities acquired from the issuer in a 

transaction subject to an exemption under section 

4(6) (15 U.S.C. 77d(6)) of the Act. 

9 17 CFR 230.144A. The proposed rule change 

does not affect the exclusions currently in the 

definition of ‘‘TRACE-eligible security,’’ which are: 

(i) Debt issued by a government-sponsored entity; 

and (ii) debt that is a mortgage-backed or assetbacked security, a collateralized mortgage 

obligation, or a money market instrument having a 

maturity at issuance of one year or less. 

10 17 CFR 230.144(a)(3). 

11 15 U.S.C. 77c. 

12 15 U.S.C. 77a et seq. If an insolvent corporation 

is reorganized under Chapter 11 of the U.S. 

Bankruptcy Code, frequently new debt securities 

are issued. The issuance is subject to the approval 

of the trustee and the securities are not required to 

be registered under the Securities Act. See, e.g., 

U.S. Bankruptcy Code, 11 U.S.C. 101 et seq. 

13 15 U.S.C. 77c(a)(9). For example, an issuer may 

exchange an issue of debt securities that are 

registered under the Securities Act (and subject to 

both TRACE reporting and dissemination) for a new 

security that is not registered in reliance upon 

Securities Act Section 3(a)(9) (15 U.S.C. 77c(a)(9)), 

which permits such exchanges without registration 

of the new security. Although the exchanged 

security was TRACE-eligible, the new security is 

not because it is not registered as required in Rule 

6710(a). 

14 15 U.S.C. 77c(a)(2). 

15To be a TRACE-eligible security, a security 

must also be U.S. dollar denominated, depository 

eligible and issued by a U.S. and/or foreign private 

issuer. The credit rating (or lack of a rating) of a 

security does not impact TRACE eligibility. 

16 15 U.S.C. 77a et seq. 

17FINRA is aware that as a result of these 

amendments certain ‘‘TRACE-eligible securities’’ 

may not be subject to the notice and informational 

requirements of Rule 6760, and as a result initially 

may not be included in the TRACE Issue Master. 

As noted in FINRA’s Trade Reporting Notice, dated 

February 22, 2008, if a firm has a reporting 

obligation under Rule 6730 in a TRACE-eligible 

security that is not included in the TRACE Issue 

Master, the firm must notify FINRA immediately 

and provide the CUSIP and other information 

necessary for FINRA to update the TRACE Issue 

Master and enable the firm to promptly report the 

transaction to TRACE and comply with its 

obligations under Rule 6730. 

18 17 CFR 230.144(a)(3). 

19 17 CFR 230.144A(a)(1). 

20 17 CFR 230.144A. 

21 17 CFR 230.144A. 

22 15 U.S.C. 77d(2). 

23 17 CFR 230.144A. 

24 15 U.S.C. 77d(2). 

25 17 CFR 230.144(a)(3). 

26 17 CFR 230.144A. 

27 17 CFR 230.144A. 

the requirement that a TRACE-eligible 

security be registered under the 

Securities Act,7 thus including more 

corporate debt securities, and restates 

and broadens the provision applicable 

to ‘‘restricted securities’’ as defined in 

Securities Act Rule 144(a)(3),8 to 

include any ‘‘restricted security’’ sold 

pursuant to Securities Act Rule 144A.9

Debt Securities Eligible for Public Sale 

The current definition of ‘‘TRACEeligible security’’ in Rule 6710(a) was 

adopted in 2002 and has not been 

amended. Generally, the definition is 

sufficiently broad to require the 

reporting of, and provide price 

transparency for, a substantial portion of 

corporate bonds that are eligible for 

public sale (i.e., they are freely tradable 

because they are not ‘‘restricted 

securities’’ as defined in Securities Act 

Rule 144(a)(3)).10 However, FINRA has 

identified several situations where 

corporate debt securities that are eligible 

for public sale in the secondary market 

are trading without TRACE price 

transparency. In many cases, the 

securities that are not subject to TRACE 

are ‘‘exempted securities’’ under Section 

3 of the Securities Act.11 For example, 

transactions in corporate debt securities 

that are issued subject to the jurisdiction 

and approval of a court of competent 

jurisdiction in insolvency matters may 

be eligible for public sale and not 

reported to TRACE because they are not 

registered under the Securities Act.12 In 

addition, among others, debt securities 

issued as part of an issuer exchange 

offer effected pursuant to Securities Act 

Section 3(a)(9) 13 and those issued by a 

bank or other financial institutions 

under Securities Act Section 3(a)(2) 14

(or another subparagraph of the section) 

generally are not subject to TRACE 

reporting and dissemination for this 

reason. 

FINRA proposes to amend Rule 

6710(a) to remove the unnecessary 

limitation on the scope of the definition 

of TRACE-eligible security by deleting 

the phrase ‘‘(1) registered under the 

Securities Act’’ from the definition. 

Eliminating the registration requirement 

will permit TRACE to capture 

transaction information for all debt 

securities that are eligible for public sale 

(and that otherwise meet the standards 

for TRACE eligibility).15 FINRA will 

increase price transparency in such 

corporate bonds, which FINRA believes 

is important because many securities 

that are not registered but are eligible for 

public sale are being purchased and 

sold by all market participants, 

including retail investors. Further, 

FINRA’s obligation to conduct 

surveillance in the corporate bond 

market is not limited to transactions in 

securities that are registered under the 

Securities Act.16 Thus, transactions in 

corporate bonds that are eligible for 

public sale (and that otherwise meet the 

standards for TRACE eligibility) will be 

included in the audit trail to enhance 

the surveillance of the corporate bond 

market.17 In this regard, FINRA’s 

transaction reporting rules apply 

generally to any equity security that is 

eligible for public sale and do not 

consider registration as a factor. FINRA 

believes that including debt securities 

that are eligible for public sale as 

TRACE-eligible securities is vital to its 

mandate to regulate the market to 

promote market integrity and to protect 

investors. 

Rule 144A Transactions 

The current definition of TRACEeligible security requires transaction 

reporting for some but not all of the 

large market in corporate debt securities 

that are ‘‘restricted securities,’’ as 

defined in Securities Act Rule 

144(a)(3),18 sold to ‘‘qualified 

institutional buyers’’ (‘‘QIBs’’), as 

defined in Securities Act Rule 

144A(a)(1),19 in transactions effected 

pursuant to Rule 144A (‘‘Rule 144A 

transactions’’).20 Although FINRA 

believes that a significant number of 

‘‘restricted securities’’ that are sold in 

Rule 144A21 transactions are preceded 

by an offering that is exempt under 

Securities Act Section 4(2),22 the 

limitation in the definition excludes 

other Rule 144A23 transactions that 

should be included in the TRACE audit 

trail. 

FINRA proposes to amend Rule 

6710(a) to eliminate the requirement 

regarding Securities Act Section 4(2) 24

in the defined term, TRACE-eligible 

security. The proposed amendment 

would include as TRACE eligible a 

‘‘’restricted security’ as defined in 

Securities Act Rule 144(a)(3)’’ 25 if it is 

‘‘sold pursuant to Securities Act Rule 

144A.’’ 26

FINRA believes that there is no 

compelling reason to exclude corporate 

debt securities sold in a Rule 144A 27

transaction from the definition of 

TRACE-eligible security simply because 

such corporate debt securities are issued 

or offered under other exemptive 


rwilkins on PROD1PC63 with NOTICES
10632 Federal Register / Vol. 74, No. 46 / Wednesday, March 11, 2009 / Notices 

28 15 U.S.C. 77a et seq. 

29 17 CFR 230.901–905. 

30 17 CFR 230.144A. 

31 17 CFR 230.144A. 

32 17 CFR 230.144A. 

33Currently, as provided in Rule 6750, FINRA 

does not disseminate Securities Act Rule 144A 

transactions, and FINRA does not propose to amend 

Rule 6750. See e-mail from Sharon Zackula, 

Associate Vice President and Associate General 

Counsel, FINRA, to Geoffrey Pemble, Special 

Counsel, Division of Trading and Markets, 

Commission, dated March 4, 2009. 

34 15 U.S.C. 78o–3(b)(6). 

35 17 CFR 200.30–3(a)(12). 

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

2Securities Exchange Act Release No. 59253 

(January 15, 2009), 74 FR 4792. 

provisions of the Securities Act.28 For 

example, in a global offering, some debt 

securities may be issued as part of a 

foreign tranche pursuant to Regulation 

S.29 Under the proposed amendment, 

U.S. resales of securities from that 

tranche effected as Rule 144A 30

transactions would be required to be 

reported to TRACE. The proposed 

amendment regarding Rule 144A 31

transactions will allow FINRA to obtain 

a more complete audit trail of Rule 

144A 32 transactions in corporate bonds. 

This additional transaction data will 

enhance the regulatory surveillance of 

the corporate bond market as a whole.33

FINRA will announce the effective 

date of the proposed rule change in a 

Regulatory Notice to be published no 

later than 60 days following 

Commission approval. The effective 

date will be no later than 30 days 

following publication of the Regulatory 

Notice announcing Commission 

approval. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,34 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 provide 

FINRA with heightened capabilities to 

regulate and conduct surveillance in the 

corporate debt securities markets, 

enhance market transparency and 

protect investors and other market 

participants by including in TRACE 

certain corporate debt securities that 

currently are traded in the same markets 

in which TRACE-eligible securities are 

traded by the same market participants 

and investors. 

B.Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change would impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of 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. 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–FINRA–2009–004 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–2009–004. 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, 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–2009–004 and 

should be submitted on or before April 

1, 2009.35

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–5203 Filed 3–10–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59495; File No. SR–FINRA– 

2008–052] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Granting 

Approval of a Proposed Rule Change 

Relating to the Adoption of FINRA Rule 

2140 (Interfering With the Transfer of 

Customer Accounts in the Context of 

Employment Disputes) in the 

Consolidated FINRA Rulebook 

March 3, 2009. 

I. Introduction 

On October 29, 2008, Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) (f/k/a National Association 

of Securities Dealers, Inc. [‘‘NASD’’]) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) proposed 

rule change SR–FINRA–2008–052 

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

Securities Exchange Act of 1934 

(‘‘Act’’).1 Notice of the proposal was 

published in the Federal Register on 

January 27, 2009.2 No comment letters 

were received. For the reasons 

discussed below, the Commission is 


rwilkins on PROD1PC63 with NOTICES