9412 Federal Register / Vol. 72, No. 40 / Thursday, March 1, 2007 / Proposed Rules 

1See Section 15(b)(11) of the Act, 15 U.S.C. 

78o(b)(11). 

2Section 19(b)(7) of the Act. 15 U.S.C. 78s(b)(7). 

Specifically, under Section 19(b)(7), these SROs 

submit those proposed rule changes that relate to 

higher margin levels, fraud or manipulation, 

recordkeeping, reporting, listing standards, or 

decimal pricing for security futures products, sales 

practices for security futures products for persons 

who effect transactions in security futures products, 

or rules effectuating the SRO’s obligation to enforce 

the securities laws. Id. 

3Section 19(b)(7)(B) of the Act. 15 U.S.C. 

78s(b)(7)(B). Proposed rule changes that relate to 

margin, except for those that result in higher margin 

levels, must be filed pursuant to Sections 19(b)(1) 

of the Act. 15 U.S.C. 78s(b)(1). 

4 17 CFR 240.19b–4. See Securities Exchange Act 

Release No. 50486 (October 4, 2004), 69 FR 60287 

(October 8, 2004) (File No. S7–18–04) (‘‘Electronic 

19b–4 Adopting Release’’). 

5 17 CFR 240.19b–4(m). 

6See Securities Exchange Act Release No. 44692 

(August 13, 2001), 66 FR 43721 (August 20, 2001), 

(19b–7 Adopting Release). 

7The SRO would determine which individuals 

would be supplied with User IDs and passwords to 

access the secure Web site. See infra note 11 and 

accompanying text. 

8Occasionally, an SRO may find it necessary to 

file documents that cannot be submitted 

electronically, such as comment letters submitted to 

the Exchange before filing, or other exhibits. In 

addition, it may not be appropriate to require 

proprietary and other information subject to a 

request for confidential treatment to be filed 

electronically. Accordingly, the proposed 

amendments to Rule 19b–7 and Form 19b–7 would 

retain the flexibility to permit portions of a rule 

filing to be made in paper form under limited 

circumstances. For example, the Commission 

would permit SROs to file materials for which 

confidential treatment is requested in paper format. 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 240 and 249 

[Release No. 34–55341; File No. S7–06–07] 

RIN 3235–AJ80 

Proposed Rule Changes of SelfRegulatory Organizations 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Proposed rule. 

SUMMARY: The Securities and Exchange 

Commission (‘‘Commission’’) is 

proposing to require Self-Regulatory 

Organizations (‘‘SROs’’) that submit 

proposed rule changes pursuant to 

Section 19(b)(7)(A) of the Securities 

Exchange Act of 1934 (‘‘Act’’) to file 

these rule changes electronically. In 

addition, the Commission is proposing 

to require SROs to post all such 

proposed rule changes on their Web 

sites. Together, the proposed 

amendments are designed to expand the 

electronic filing by SROs of proposed 

rule changes, making it more efficient 

and cost effective, and to harmonize the 

process of filings made under Section 

19(b)(7)(A) with that already in place for 

filings made by SROs under Section 

19(b)(1) of the Act. 

DATES: Comments should be submitted 

on or before April 30, 2007. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/proposed.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number S7–06–07 on the subject line; 

or 

• Use the Federal eRulemaking Portal 

(http://www.regulations.gov). Follow the 

instructions for submitting comments. 

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 S7–06–07. This file number 

should be included on the subject line 

if e-mail is used. To help us 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/ 

proposed.shtml). Comments are also 

available for public inspection and 

copying in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549. All comments 

received will be posted without change; 

we do not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. 

FOR FURTHER INFORMATION CONTACT: John 

Roeser, Assistant Director, at (202) 551– 

5630, Timothy Fox, Special Counsel, at 

(202) 551–5543, Michou Nguyen, 

Special Counsel, at (202) 551–5634, 

Sherry Moore, Paralegal, at (202) 551– 

5549, Division of Market Regulation, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–6628. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Under Section 19(b)(7) of the Act and 

Rule 19b–7 thereunder, securities 

futures exchanges registered with the 

Commission under Section 6(g) of the 

Act and associations registered with the 

Commission for the limited purpose of 

regulating activities of members who are 

registered as broker-dealers in security 

futures 1 with respect to securities 

futures products under Section 15A(k) 

of the Act are required to file certain 

categories of proposed rule changes 

with the Commission.2 These proposed 

rule changes are published for comment 

and may take effect: (1) When a written 

certification has been filed with the 

Commodity Futures Trading 

Commission (‘‘CFTC’’) under Section 

5c(c) of the Commodity Exchange Act; 

(2) when the CFTC determines that 

review of the proposed rule change is 

not necessary; or (3) when the CFTC 

approves the proposed rule change.3

Rule 19b–7 and Form 19b–7 under the 

Act set forth the process for SROs to file 

proposed rule changes under Section 

19(b)(7). 

Currently, other SROs are required to 

electronically file proposed rule changes 

submitted to the Commission under 

Section 19(b)(1) of the Act.4 SROs are 

also required to post such proposed rule 

changes on their Web sites.5

Proposed rule changes submitted by 

SROs under Section 19(b)(7) of the Act, 

in contrast, are submitted to the 

Commission in paper.6 In addition, 

SROs are not currently required to post 

proposed rule changes filed under 

Section 19(b)(7) on their Web sites. The 

Commission is now proposing to amend 

Rule 19b–7 and Form 19b–7 to require 

electronic filing and Web posting of 

proposed rule changes filed under 

Section 19(b)(7) of the Act. These 

proposed requirements are consistent 

with the requirements already in place 

for proposed rule changes filed pursuant 

to Rule 19b–4 and Form 19b–4. 

II. Proposed Amendments 

A. Electronic Filing 

The Commission is proposing to 

amend Rule 19b–7 and Form 19b–7 to 

require that all Forms 19b–7, and any 

amendments thereto, be submitted 

electronically to the Commission. The 

proposal would modernize this rule 

filing process by expanding the types of 

proposed rule changes filed 

electronically with the Commission. 

Each SRO would have access to a secure 

Web site, known as the Electronic Form 

Filing System (‘‘EFFS’’), which would 

enable authorized individuals at the 

SRO to file with the Commission an 

electronic Form 19b–7 on the SRO’s 

behalf.7 The current requirement in 

Form 19b–7 that SROs submit multiple, 

paper copies of proposed rule changes 

would be eliminated.8 Under the 

proposed amendments, a proposed rule 

change would be deemed filed with the 

Commission on the business day that it 

is submitted electronically, so long as 

the Commission receives it on or before 


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9The Commission notes that the Electronic 

Signatures in Global and National Commerce Act, 

15 U.S.C. 7001, et seq. does not apply in this regard. 

10The signature requirement of Form 19b–7 

currently states that ‘‘pursuant to the requirements 

of the [Act], the [SRO] has duly caused the filing 

to be signed on its behalf by the undersigned 

thereunto duly authorized.’’ See 17 CFR 249.822. 

The Commission proposes to clarify on Form 19b–

7 that this individual must be an officer of the SRO, 

who has been authorized by the SRO’s governing 

body to sign proposed rule changes on behalf of the 

SRO. The General Instructions to Form 19b–7 

currently provide that the ‘‘chief executive officer, 

general counsel, or other officer or director of the 

SRO that exercises similar authority must manually 

sign at least one copy of the completed Form 19b–

7.’’ Therefore, the proposed clarification would not 

impose a new obligation for SRO officers. 

11A digital ID, sometimes called a ‘‘digital 

certificate,’’ is a file on the computer that identifies 

the user. Computers can use a digital ID to create 

a digital signature that verifies both that the 

message originated from a specific person and that 

the message has not been altered either 

intentionally or accidentally. The user obtains a 

digital ID from a ‘‘Certificate Authority’’ (‘‘CA’’) for 

a modest sum (currently approximately $20 per 

year). When the SRO electronically sends the Form 

19b–7 to the Commission, the digital ID will 

encrypt the data through a system that uses ‘‘key 

pairs.’’ With key pairs, the SRO’s software 

application uses one key to encrypt the document. 

When the Commission receives the SRO’s 

electronic document, the Commission’s software 

will use a matching key to decrypt the document. 

12 17 CFR 240.17a–1. 

13See Proposed Rule 19b–7(d). These 

requirements are substantially consistent with the 

requirements for Form 19b–4 filings, which were 

adapted from Section 232.302 of Regulation S–T, 17 

CFR 232.302 for EDGAR filers. 

14See infra notes 42–44 and accompanying text. 

15Rule 19b–4 requires SROs to post proposed rule 

changes filed under Section 19(b)(1), and any 

amendments thereto, on their Web site within two 

business days after the filing of the proposed rule 

change. 17 CFR 240.19b–4(l). 

16A screen within EFFS, the Web-based 

electronic rule filing system, would indicate that a 

rule filing has not been properly filed and has been 

returned to the SRO. 

17 17 CFR 240.19b–4(m). 

18The proposed amendments to Form 19b–7 are 

attached as Appendix A. 

5:30 p.m., Eastern Standard Time or 

Eastern Daylight Savings Time, 

whichever is currently in effect, and it 

is filed in accordance with the 

requirements of Rule 19b–7 and Form 

19b–7. 

The Commission also proposes to 

amend Form 19b–7 so that SROs would 

be required to file their proposed rule 

changes with an electronic signature.9

Form 19b–7 currently requires a person 

who is ‘‘duly authorized’’ by an SRO to 

sign manually all rule filings.10 Under 

the proposal, each duly authorized 

signatory would be required to obtain a 

‘‘digital ID,’’ which would provide both 

the Commission and the SRO with 

assurances of the authenticity and 

integrity of the electronically-submitted 

Form 19b–7.11 In addition, each 

signatory would be required to 

manually sign the Form 19b–7, 

authenticating, acknowledging, or 

otherwise adopting his or her electronic 

signature that is attached to or logically 

associated with the filing. In accordance 

with Rule 17a–1 under the Act,12 the 

SRO would be required to retain that 

manual signature page of the rule filing, 

authenticating the signatory’s electronic 

signature, for not less than five years 

after the Form 19b–7 is filed with the 

Commission and, upon request, furnish 

a copy of it to the Commission or its 

staff.13

Based on the Commission’s 

experience receiving electronic Rule 

19b–4 filings from SROs for nearly two 

years, the Commission believes that 

requiring SROs to file proposed rule 

changes on Form 19b–7 electronically 

would have many benefits. First, the 

Commission believes electronic filing 

would reduce the amount of time 

required by SROs to submit SRO rule 

filings by eliminating paper delivery, 

photocopying, and distribution. Under 

the current system, SROs send paper 

copies of proposed rule changes filed 

under Rule 19b–7 to the Commission 

via messenger, overnight delivery, or 

U.S. mail. Electronic filing would 

reduce costs for the SROs 14 because the 

SROs would no longer incur costs for 

delivery of paper filings or for the SRO 

staff time currently devoted to preparing 

filing packages. The Commission also 

would benefit from reducing the 

personnel time currently associated 

with manually processing paper filings. 

Second, electronic filing would allow 

for a more efficient use of Commission 

resources by integrating the SRO 

electronic filing technology with SRO 

Rule Tracking System (‘‘SRTS’’), the 

internal Commission database that 

tracks these filings, the proposal would 

enable Commission staff to more easily 

monitor and process proposed rule 

changes. Pertinent information 

regarding proposed rule changes, as 

well as amendments, would be captured 

automatically by SRTS. As a result, 

Commission staff would be able to 

monitor electronically the progress of 

proposed rule changes filed on Form 

19b–7 from initial receipt through final 

disposition and thereby enhance its 

management of the rule filing process. 

B. Posting of Rule 19b–7 Proposed Rule 

Changes on SRO Web Sites 

The Commission also is proposing to 

amend Rule 19b–7 to require each SRO 

to post proposed rule changes filed 

pursuant to that Rule, and any 

amendments thereto, on its public Web 

site no later than two business days after 

filing with the Commission.15 This 

requirement would provide interested 

persons with quick access to the 

proposed rule change, while at the same 

time providing SROs with sufficient 

time to comply with this posting 

requirement. The complete proposed 

rule change would be available in the 

Commission’s Public Reference Room in 

electronic format. The Commission 

believes that Web site accessibility of 

SRO proposed rule changes filed under 

Section 19(b)(7) of the Act would (1) 

provide interested persons with faster 

access to proposed rule changes; (2) 

facilitate the ability of interested 

persons to comment on the proposals; 

and (3) save SRO resources currently 

used to monitor the Commission’s 

Public Reference Room for competitors’

proposed rule changes. 

The Commission is also proposing to 

require an SRO to remove a proposed 

rule change from its Web site within 

two business days of Commission 

notification to the SRO that such 

proposed rule change was not properly 

filed,16 or of the SRO’s withdrawal of 

such proposed rule change. 

C. Requirement To Update Rule Text on 

SRO Web Sites 

Currently, Rule 19b–4(m) under the 

Act 17 requires all SROs to post and 

maintain on their Web sites a complete 

and accurate copy of their rules. This 

requirement currently applies to SROs 

that file proposed rule changes under 

Section 19(b)(7) of the Act. The 

Commission is not proposing to change 

this requirement. All SROs would 

continue to be required to post and 

maintain a complete and accurate copy 

of their rules. The Commission is 

proposing to add paragraph (g) to Rule 

19b–7 to clarify that an SRO would be 

required (1) to post and maintain a 

current and complete version of its rules 

on its Web site and (2) to update the 

rules posted on its Web site within two 

days after a rule change becomes 

effective. The Commission believes that 

this proposal clarifies when an SRO 

must update the rules posted on its Web 

site to reflect proposed rule changes 

filed under Rule 19b–7. 

D. Form 19b–7 Amendments 

1. Form 19b–7 Amendments 

The Instructions to Form 19b–7 

would be amended to eliminate the 

required submission of nine paper 

copies and instead require electronic 

filing of Form 19b–7.18 To access the 

secure Internet site for Web-based filing 

of the Form 19b–7, the SRO would 

submit to the Commission an External 

Application User Authentication Form 


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9414 Federal Register / Vol. 72, No. 40 / Thursday, March 1, 2007 / Proposed Rules 

19This Commission Web-based application 

currently exists and allows authorized external 

users to access select Commission systems. 

20The authorized user also would be able to 

indicate if there would be a separate filing of any 

hard copy exhibits that are unable to be submitted 

electronically. 

21As noted supra notes 9–11, and accompanying 

text, a person who is a ‘‘duly authorized officer’’ at 

the SRO would be required to place his or her 

‘‘electronic signature’’ on the Form 19b–7 before it 

is transmitted electronically to the Commission. 

22Exhibits 2, 3, and 5 may not be available in 

Microsoft Word and could be submitted in another 

acceptable electronic format, including Microsoft 

Excel, Microsoft PowerPoint, Adobe Acrobat, or 

Corel WordPerfect. 

23For example, the SRO would click separate 

boxes on the second screen to attach documents 

containing the various exhibits; notices, written 

comments, transcripts, other communications; 

form, report, or questionnaire; proposed rule text; 

CFTC certification; the completed notice of the 

proposed rule change for publication in the Federal 

Register; and, marked copies of amendments if 

applicable. 

24 17 CFR 249.822. 

25This exception from electronic filing would not 

apply to Page 1 to Form 19b–7 or Exhibits 1 and 

4 thereto but would only be applicable to Exhibits 

2 and 3, and any documents filed pursuant to a 

request for confidential treatment pursuant to the 

Freedom of Information Act, 5 U.S.C. 552. 

(‘‘EAUF’’)19 to register each individual 

at the SRO who will be submitting 

Forms 19b–7 on behalf of the SRO. 

Upon receipt and verification of the 

information in the EAUF process, the 

Commission would issue each such 

person a User ID and Password to 

permit access to the Commission’s 

secure Web site. As Form 19b–7 would 

be electronic, initially the authorized 

user at an SRO would access a screen 

containing a filing template, referenced 

as Page 1, in which it could identify the 

SRO, enter a brief description of the 

proposed rule change, and enter a brief 

description of the SRO governing body 

action approval.20 The SRO would 

provide contact information and place 

the electronic signature of a duly 

authorized officer on this Page 1 initial 

screen.21 Only a duly authorized officer 

of the SRO would be authorized to affix 

his or her digital signature to the Form 

19b–7. The second screen of the 

electronic Form 19b–7 would provide 

the SRO with a means to attach the 

proposed rule change and related 

exhibits in Microsoft Word format.22

EAUF users would have electronic 

access to the general instructions for 

using the Form, as adapted for 

electronic filing.23 Finally, the SRO 

would use the electronic Form 19b–7 to 

amend or withdraw a rule filing 

pending with the Commission. 

The Commission is also proposing a 

number of changes to Form 19b–7, 

unrelated to electronic filing, that are 

modeled after certain provisions in 

Form 19b–4, which the Commission 

preliminarily believes would facilitate 

an SRO’s proper filing of Form 19b–7. 

For example, the format of the 

Instructions to Form 19b–7 would be 

organized according to the sections used 

for Form 19b–4 Instructions, instead of 

the combination of questions and titles 

that serve as subject heads in the 

Instructions to Form 19b–7 currently. 

The proposed Form 19b–7 would 

require the SRO to describe the purpose 

of the proposed rule change in sufficient 

detail to enable the public to provide 

meaningful public comment. The Form 

19b–7 would direct the SRO to relevant 

sections of the Act that are appropriate 

for discussion in the Statutory Basis 

section of the Form 19b–7 and would 

clarify that a mere assertion that the 

proposed rule change is consistent with 

the Act is not sufficient to describe why 

the proposed rule change is consistent 

with the Act. The proposed Form 19b–

7 would also provide updated 

instructions related to the solicitation of 

comments from interested persons 

regarding the proposed rule change. 

These updated instructions would 

include the new address where 

commenters may direct comments to 

Form 19b–7 filings in hard copy and 

describe the manner in which 

comments may submitted on the SEC 

Web site. 

The proposed changes to Form 19b–

7 would alter the way that the Exhibits 

are organized and the Instructions to 

such Exhibits are presented. For 

example, the proposed Instructions 

would direct an SRO to include the 

completed notice of the proposed rule 

change (‘‘Form 19b–7 Notice’’ or 

‘‘Notice’’) as Exhibit 1, whereas such 

notice is not assigned to an Exhibit in 

the existing Form 19b–7. The 

instructions for the Form 19b–7 Notice 

would be amended to include more 

detailed guidance on the current 

requirement that the Notice must be 

formatted to comply with the 

requirements for Federal Register 

publication. For example, the proposed 

Instructions would provide guidance 

regarding Federal Register requirements 

relating to margin spacing, page 

numbering, and line spacing. 

The subject of existing Exhibit 1, 

relating to communications with third 

parties on the subject of the proposed 

rule change, would move to Exhibit 2. 

The guidance in the existing 

Instructions to Exhibit 2 would be 

replaced, in Exhibit 3, with more 

detailed guidance as to how the SRO 

should present forms, reports, and 

questionnaires that the SRO proposes to 

use to implement the terms of the 

proposed rule change. The requirement 

to include the text of the proposed rule 

change would remain in Exhibit 4, but 

the requirement for the SRO to describe 

the anticipated effect of the proposed 

rule change would have on the 

application of other rules of the SRO 

would move to Section II(A)(1)(b) of the 

Form 19b–7 Notice. The requirements 

relating to Exhibit 5, regarding the 

effectiveness of the proposed rule 

change, would remain the same. 

The Instructions to Form 19b–7 

currently describe circumstances under 

which an SRO must file an amendment 

to a proposed rule change and the 

procedures an SRO must follow when 

submitting an amendment. The 

proposed changes to the Instructions to 

Form 19b–7 would describe the 

procedures an SRO would follow to 

submit an amendment electronically. 

In addition, the Commission notes 

that Form 19b–7 will continue to 

require an SRO to: (1) Describe the text 

of the proposed rule change in a 

sufficiently detailed and specific 

manner as to permit interested persons 

to submit comments; (2) describe the 

reasons for adopting the proposed rule 

change, how the proposal will address 

any problems described in the proposed 

rule change, and the manner in which 

the proposed rule change will affect 

various market participants; (3) describe 

how the filing relates to existing rules of 

the SRO;24 and (4) provide an accurate 

statement of the authority and statutory 

basis for, and purpose of, the proposed 

rule change, as well as its impact on 

competition, if any, and a summary of 

any written comments received by the 

SRO. 

As noted above, the Commission 

recognizes that in rare circumstances 

SROs may be unable to file certain 

documents electronically with the 

Commission. Therefore, under these 

limited circumstances, the Commission 

would allow SROs to file documents in 

paper format within five days of the 

electronic filing of all other required 

documents.25

2. Accurate, Consistent, and Complete 

Forms 19b–7 

The Commission firmly believes that, 

to provide the public with a meaningful 

opportunity to comment, a proposed 

rule change must be accurate, 

consistent, and complete. Form 19b–7 

states that the form, including the 

exhibits, is intended to elicit 

information necessary for the public to 

provide meaningful comment on the 

proposed rule change and for the 

Commission to determine whether 

abrogation of the proposal is appropriate 

because it unduly burdens competition 

or efficiency, conflicts with the 


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26Section 19(b)(7)(C) of the Act grants to the 

Commission, after consultation with the CFTC, the 

authority to summarily abrogate a proposed rule 

change that has taken effect pursuant to Section 

19(b)(7)(B) of the Act if it appears to the 

Commission that such a rule change unduly 

burdens competition or efficiency, conflicts with 

the securities laws, or is inconsistent with the 

public interest and the protection of investors. 

27The proposed amendment to Form 19b–4 is 

attached as Appendix B. 

28See Electronic 19b–4 Adopting Release, supra 

note 4. 

29 44 U.S.C. 3501 et seq. 30See 15 U.S.C. 78f(g)(4)(B)(i) and 78o–3(k)(3)(A). 

securities laws, or is inconsistent with 

the public interest and protection of 

investors.26 The SRO must provide all 

the information called for by the form, 

including the exhibits, and must present 

the information in a clear and 

comprehensible manner. 

Currently, Commission staff devotes 

significant time to processing proposed 

rule changes, reviewing them for 

accuracy and completeness, and 

preparing them for publication. SRO 

staff should ensure that the filings: (1) 

Contain a properly completed Form 

19b–7; (2) contain a clear and accurate 

statement of the authority for, and basis 

and purpose of, such rule change, 

including the impact on competition; (3) 

contain a summary of any written 

comments received by the SRO; (4) 

contain the proper certification 

submitted to the CFTC, any other 

appropriate determination made by the 

CFTC that a review of the proposed rule 

change is not necessary, or an indication 

that the CFTC has approved the 

proposed rule change; and (5) describe 

the impact of the proposed rule change 

on the existing rules of the SRO, 

including any other rules proposed to be 

amended. As described in the current 

Form 19b–7, filings that do not comply 

with the foregoing are deemed not filed 

and returned to the SRO. In the future, 

electronically filed proposed rule 

changes that do not comply with the 

foregoing would continue to be returned 

to the SRO, but in electronic format, 

and, consistent with current practice, 

would be deemed not filed with the 

Commission until all required 

information has been provided. 

E. Rule 19b–4 and Form 19b–4 

Conforming Changes 

The Commission also is proposing to 

make certain conforming changes to 

Rule 19b–4 to account for the proposed 

amendments to Rule 19b–7. In 

particular, the Commission proposes to 

remove a reference in paragraph (m) of 

Rule 19b–4 relating to the requirement 

that SROs update their Web sites to 

reflect proposed rule changes filed 

pursuant to Section 19(b)(7) of the Act. 

This requirement is proposed to be 

incorporated into new paragraph (g) of 

Rule 19b–7. The Commission is also 

proposing to make other changes to 

paragraph (m) of Rule 19b–4 to clarify 

that the obligation for SROs to update 

their Web sites to reflect proposed rule 

changes under this provision applies 

only to proposed rule changes filed 

under Section 19(b)(1) of the Act. 

The Commission further proposes to 

clarify on Form 19b–4 that an 

individual who signs the Form 19b–4 

digitally must be an officer authorized 

by the SRO’s governing body to sign 

proposed rule changes on behalf of the 

SRO. Accordingly, the Commission 

proposes to amend Page 1 of Form 19b–

4 to add the word ‘‘officer’’ to follow the 

phrase ‘‘duly authorized’’ in the 

signature box appearing on that page.27

The Commission notes that this change 

does not create any new obligation. 

Section F of the Instructions to Form 

19b–4 provides that a ‘‘duly authorized 

officer’’ sign Form 19b–4 submissions, 

but the word ‘‘officer’’ was 

inadvertently omitted from the signature 

box when the electronic Form 19b–4 

was adopted.28

III. Request for Comment 

The Commission requests the views of 

commenters on all aspects of the 

proposed amendments, discussed 

above, to Rule 19b–7 and Form 19b–7, 

and to Rule 19b–4 and Form 19b–4 

under the Act: 

• In particular, the Commission 

requests comment on whether there is a 

need for an exception to the electronic 

filing requirement of Exhibit 5 to Form 

19b–7 (Date of Effectiveness of Proposed 

Rule Change). If so, what specific 

situations should be excepted, and what 

accommodations should be made? 

• Would the proposed amendment 

create additional costs or other burdens 

for SROs that submit Form 19b–7s? 

IV. Paperwork Reduction Act 

Certain provisions of the proposed 

rule and form contain ‘‘collection of 

information requirements’’ within the 

meaning of the Paperwork Reduction 

Act of 1995.29 The Commission has 

submitted the information to the Office 

of Management and Budget (‘‘OMB’’) for 

review in accordance with 44 U.S.C. 

3507 and 5 CFR 1320.11. The 

Commission has submitted revisions to 

the current collection of information 

titled ‘‘Rule 19b–7 Under the Securities 

Exchange Act of 1934’’ (OMB Control 

No. 3235–0553). The Commission has 

also submitted revisions to the current 

collection of information titled ‘‘Form 

19b–7 Under the Securities Exchange 

Act of 1934’’ (OMB Control No. 3235–

0553). In addition, the Commission has 

submitted revisions to the current 

collection of information titled ‘‘Rule 

19b–4 Under the Securities Exchange 

Act of 1934’’ (OMB Control No. 3235–

0045). Finally, the Commission has 

submitted revisions to the current 

collection of information titled ‘‘Form 

19b–4 Under the Securities Exchange 

Act of 1934’’ (OMB Control No. 3235–

0045). An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a currently valid 

control number. 

A. Summary of Collection of 

Information 

Rule 19b–7 currently requires an SRO 

that proposes to add, delete, or amend 

its rules relating to certain subjects 30 to 

submit such proposed rule change to the 

Commission on Form 19b–7. Form 19b–

7 currently requires the respondent: (1) 

To state the purpose of the proposed 

rule change; (2) to state the authority 

and statutory basis for the proposed rule 

change; (3) to describe the proposal’s 

impact on competition; (4) to provide a 

summary of any written comments on 

the proposed rule change received by 

the SRO; and (5) to describe the date 

upon which the proposed rule change 

becomes effective and provide 

supporting documentation relevant to 

the effectiveness date. The proposed 

amendments would add a technical 

requirement to Form 19b–7 that an SRO 

provide on Page 1 of Form 19b–7 more 

information about a staff member 

prepared to answer questions about the 

filing, such as the SRO staff member’s 

title, email address and fax number. The 

proposed amendments would require 

Web site posting of all proposed rule 

changes, and any amendments thereto. 

In addition, the proposed amendments 

would codify in Rule 19b–7 the current 

requirement in Rule 19b–4(m) that SROs 

(1) post a current and complete set of 

their rules on their Web sites and (2) 

update their Web sites within two 

business days after a rule change 

becomes effective to reflect such rule 

changes filed pursuant to Section 

19(b)(7) of the Act. The proposed 

amendment would also clarify that a 

mere assertion that the proposed rule 

change is consistent with the Act is not 

sufficient to describe why the proposed 

rule change is consistent with the Act. 

Rule 19b–4(m) would continue to 

require SROs to update their rules on 

their Web sites to reflect proposed rule 

changes filed pursuant to Section 

19(b)(1) of the Act. All SROs that file 

Form 19b–4 and Form 19b–7 currently 


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9416 Federal Register / Vol. 72, No. 40 / Thursday, March 1, 2007 / Proposed Rules 

31The Board of Trade of the City of Chicago, Inc. 

(‘‘CBOT’’), Chicago Mercantile Exchange, Inc. 

(‘‘CME’’), CBOE Futures Exchange LLC (‘‘CFE’’), 

National Futures Association (‘‘NFA’’), and 

OneChicago LLC (‘‘OC’’). 

32Since the implementation of the CFMA in 2001 

to September 30, 2006, SROs have filed 62 

proposed rule changes pursuant to Section 19(b)(7) 

of the Act and 13 amendments. 

33This estimate is based upon the price displayed 

for the ID on VeriSign’s Web site as of December 

21, 2006. 34See 19b–7 Adopting Release supra note 6. 

post this information on their Web sites. 

Therefore, SROs would not be required 

to provide additional information to 

comply with proposed Rule 19b–7(g) 

and current Rule 19b–4(m). 

B. Proposed Use of Information 

The information provided via EAUF, 

as required by the proposed 

amendments to Form 19b–7, would be 

used by the Commission to verify the 

identity of the SRO individual and 

provide such individual access to a 

secure Commission Web site for filing of 

the Form 19b–7. The Commission 

proposes to require that SROs post their 

proposed rule changes filed pursuant to 

Section 19(b)(7) of the Act on their Web 

sites, so that these proposals could be 

viewed by the general public, SRO 

members, competing SROs, other 

market participants, and Commission 

staff. The information would enable 

interested parties to more easily access 

SRO rules and rule filings, which would 

facilitate public comment on proposed 

SRO rules. Additionally, SRO staff, 

members, industry participants, and 

Commission staff would utilize the 

accurate and current version of SRO 

rules that are posted on the SRO Web 

site to facilitate compliance with such 

rules. 

C. Respondents 

There are currently five SROs 31

registered with the Commission as 

national securities exchanges under 

Section 6(g) of the Act or as a national 

securities association registered with the 

Commission under Section 15A(k) of 

the Act subject to the collection of 

information for Rule 19b–7, though that 

number may vary owing to the 

consolidation of SROs or the 

introduction of new entities. In a fiscal 

year, these respondents filed an average 

of 12 rule change proposals and 3 

amendments to those proposed rule 

change proposals, for an average of 15 

filings per fiscal year that are subject to 

the current collection of information.32

Of the 12 proposed rule changes filed by 

SROs, all 12 ultimately became effective 

because the SROs did not withdraw any 

proposed rule changes. 

D. Total Annual Reporting and 

Recordkeeping Burden 

1. Background 

The proposed amendments to Rule 

19b–7 and Form 19b–7 are designed to 

modernize the SRO rule filing process 

and to make the process more efficient 

by conserving both SRO and 

Commission resources. Rule 19b–7 and 

Form 19b–7 would be amended to 

require SROs to electronically file their 

proposed rule changes. Form 19b–7 

would be revised to accommodate 

electronic submission. In addition, 

SROs would be required to post on their 

Web sites proposed rule changes 

submitted on Form 19b–7 to the 

Commission and amendments thereto. 

A conforming amendment would codify 

in Rule 19b–7 the current requirement 

in Rule 19b–4(m) for SROs to maintain 

a current and complete set of their rules 

on their Web site. 

2. Rule 19b–7 and Form 19b–7 

The Commission does not expect that 

the amendments to Rule 19b–7 and 

Form 19b–7 relating to electronic filing 

of proposed rule changes and 

amendments would impose any 

material upfront cost on SROs. The 

technology for electronic filing would 

be Web-based; therefore, the SROs 

should not have any material upfront 

technology expenditures for electronic 

filing because all SROs currently have 

access to the Internet. 

However, each SRO would be 

required to obtain a digital ID from a 

certificating authority. The Commission 

staff estimates the annual cost of the ID 

to be $20 for each SRO.33 The 

Commission staff estimates that each 

SRO would purchase five such digital 

IDs for its staff. Thus, the annual cost of 

the ID for all SROs would be $500 (5 

SROs × $20 × 5). 

In addition, the Commission believes 

that SROs could incur some costs 

associated with training their personnel 

about the procedures for submitting 

proposed rule changes electronically via 

EFFS. However, the Commission 

believes that such costs will be one-time 

costs and relatively insubstantial since 

the SROs are already familiar with the 

information required in filing a 

proposed rule change with the 

Commission and would only be 

required to submit the same information 

electronically under this proposal. 

Based on the experience of the 

Commission staff in training SROs for 

the implementation of electronic Rule 

19b–4 filings, the Commission estimates 

that each SRO would spend 

approximately two hours training each 

staff member who would use the EFFS 

to submit the proposed rule changes 

electronically. Accordingly, the 

Commission estimates that the upfront 

cost of training SRO staff members to 

use EFFS will be 50 hours (5 SROs × 2 

hours × 5 staff members). 

An SRO rule change proposal is 

generally filed with the Commission 

after an SRO’s staff has obtained 

approval by its Board. The time required 

to complete a filing varies significantly 

and is difficult to separate from the time 

an SRO spends in developing internally 

the proposed rule change. However, the 

Commission estimates that 15.5 hours is 

the amount of time required to complete 

an average rule filing using present 

Form 19b–7.34 This figure includes an 

estimated 11.5 hours of in-house legal 

work and four hours of clerical work. 

The amount of time required to prepare 

amendments varies because some 

amendments are comprehensive, while 

other amendments are submitted in the 

form of a one-page letter. The 

Commission staff estimates that, under 

current rules, seven hours is the amount 

of time required to prepare an 

amendment to the rule proposal. This 

figure includes an estimated two hours 

of in-house legal work and five hours of 

clerical work. 

Based upon the experience of 

electronic filing of proposed rule 

changes on Form 19b–4, the 

Commission expects that an electronic 

Form 19b–7 and new requirements to 

Form 19b–7 would reduce by three 

hours the amount of SRO clerical time 

required to prepare the average 

proposed rule change and by four hours 

for an amendment thereto. The 

Commission does not believe that the 

new instruction specifying that an SRO 

describe the purpose of the proposed 

rule change in sufficient detail to enable 

the Commission to determine whether 

abrogation is appropriate will add any 

additional burden to the Form 19b–7 

filing process because the existing 

Instructions to Form 19b–7 provide an 

obligation that all information in the 

Form must be presented in a manner 

which will enable the Commission to 

make such a determination. The 

Commission does not believe that the 

additional contact information of an 

SRO staff member on Page 1 of the Form 

will add any measurable burden to an 

SRO submitting a Form 19b–7, because 

the information is so readily accessible 

to the party submitting the filing. With 

the proposed electronic filing, the 


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35The SROs’ four hour time savings would result 

from the elimination of tasks, such as making 

multiple copies of the Form 19b–7 and 

amendments, arranging for couriers, and making 

follow-up telephone calls to ensure Commission 

receipt. 

36This estimate is based on information from the 

Commission’s Office of Information Technology. 

37See Section F of the Instructions to Form 19b–

4. 

38SROs may also destroy or otherwise dispose of 

such records at the end of five years according to 

Rule 17a–5 under the Act. 17 CFR 240.17a–5. 

39See proposed Rule 19b–7(f). 

40See proposed Rule 19b–7(g). 

Commission staff estimates that 12.5 

hours is the amount of time that would 

be required to complete an average rule 

filing and that three hours is the amount 

of time required to complete an average 

amendment. These figures reflect the 

three hours in savings in clerical hours 

that would result from the use of an 

electronic form for rule filings and four 

hours for amendments.35 The 

Commission staff estimates that the 

reporting burden for filing rule change 

proposals and amendments with the 

Commission under the proposed 

amendments would be 159 hours (12 

rule change proposals × 12.5 hours + 3 

amendments × 3 hours). 

3. Posting of Proposed Rule Changes 

Filed Under Rule 19b–7 on SRO Web 

Sites 

The proposed amendments would 

also require SROs to post proposed rule 

changes filed under Rule 19b–7, and 

any amendments thereto, on their Web 

sites. The Commission staff estimates 

that 30 minutes is the amount of time 

that would be required to post a 

proposed rule on an SRO’s Web site and 

that 30 minutes is the amount of time 

that would be required to post an 

amendment on an SRO’s Web site.36

The Commission staff estimates that the 

reporting burden for posting rule change 

proposals and amendments on the SRO 

Web sites would be eight hours (12 rule 

change proposals × 0.5 hours + 3 

amendments × 0.5 hours). 

4. SRO Rule Text 

Currently, all SROs are required to 

post their current rules on their Web 

sites pursuant to Rule 19b–4(m). The 

Commission estimates, based upon its 

analysis in the Electronic 19b–4 

Adopting Release, that the amount of 

time required to update an SRO’s rule 

text on its Web site after a proposed rule 

change becomes effective to be four 

hours. Proposed rule changes submitted 

under Section 19(b)(7)(A) become 

effective an average of 12 times a year. 

Therefore, the Commission staff 

estimates that the reporting burden for 

updating the posted SRO rules on the 

SRO Web site will be 48 hours (12 

proposed rule changes submitted 

pursuant to Section 19(b)(7)(A) × 4 

hours). 

The proposal would move the burden 

associated with complying with this 

provision from Rule 19b–4(m) to Rule 

19b–7(g). Based upon the Commission’s 

reporting burden estimate described 

above, the Commission estimates that 

the proposal will reduce the burden 

associated with SROs’ compliance with 

the requirement provided in Rule 19b–

4 that SROs post current and complete 

rule text on their Web sites and update 

that rule text after it changes following 

the effectiveness of a proposed rule 

change by 48 hours annually and 

increase the corresponding burden for 

compliance with Rule 19b–7 by 48 

hours. 

5. Total Annual Reporting Burden 

Thus, the Commission staff estimates 

that the total annual reporting burden 

under the proposed rule would be 167 

hours (159 hours for filing proposed 

rule changes and amendments + 8 hours 

for posting proposed rule changes and 

amendments on the SROs’ Web sites + 

48 hours for posting and updating 

complete sets of SRO rule text pursuant 

to Rule 19b–7 ¥ 48 hours for posting 

and updating complete sets of SRO rule 

text pursuant to Rule 19b–4). 

In addition to the 155 hour annual 

burden, the Commission believes that 

SROs could incur some costs associated 

with training their personnel about the 

procedures for submitting proposed rule 

changes electronically and submission 

of the information via EFFS. However, 

the Commission believes that such costs 

would be one-time costs and relatively 

insubstantial since the SROs are already 

familiar with the information required 

in filing a proposed rule change with 

the Commission and would only be 

required to submit the same information 

electronically under this proposal. The 

Commission estimates that each SRO 

would spend approximately two hours 

training each staff member who will use 

the EFFS to submit the proposed rule 

changes electronically. Accordingly, the 

Commission estimates that the upfront 

cost of training SRO staff members to 

use EFFS would be 50 hours (5 SROs × 

2 hours × 5 staff members). 

The Commission does not expect that 

the proposed amendments with regard 

to electronic filing would impose any 

material additional costs on SROs. 

Instead, the Commission believes that 

the proposed amendments to Rule 19b–

7 and Form 19b–7, on balance, would 

reduce paperwork costs related to the 

submission of SRO proposed rule 

changes. The technology for electronic 

filing would be Web-based; therefore, 

the SROs should not have any 

technology expenditures for electronic 

filing because all SROs currently have 

access to the Internet. 

As previously stated, the SROs could 

incur costs of eight hours annually to 

post on their Web site their proposed 

rules, and amendments thereto, no later 

than two business days after filing with 

the Commission. With regard to posting 

of and updating of accurate and 

complete text of SRO final rules, the 

Commission believes that the proposal 

would increase the burden associated 

with complying with Rule 19b–7 by 48 

hours and reduce the burden associated 

with complying with Rule 19b–4 by 48 

hours. In addition, the Commission does 

not anticipate that SROs would incur 

any additional costs in complying with 

the change to Form 19b–4, which 

proposes to add the word ‘‘officer’’ to 

the Signature Box because the addition 

of the word simply provides 

transparency to an obligation that 

already exists.37 Accordingly, the 

Commission does not believe that SROs 

would incur any additional costs in 

posting this information on their Web 

sites. 

E. Retention Period of Recordkeeping 

Requirements 

The SROs would be required to retain 

records of the collection of information 

(the manually signed signature page of 

the Form 19b–7) for a period of not less 

than five years, the first two years in an 

easily accessible place, according to the 

current recordkeeping requirements set 

forth in Rule 17a–1 under the Act.38 The 

SROs would be required to retain 

proposed rule changes, and any 

amendments, on their Web sites until 60 

days after effectiveness of the proposed 

rule that is filed with both the 

Commission and the CFTC or abrogation 

of the proposed rule change.39 The SRO 

would be required at all times to 

maintain an accurate and up-to-date 

copy of all of its rules on its Web site.40

F. Collection of Information Is 

Mandatory 

Any collection of information 

pursuant to the proposed amendments 

to Rule 19b–7 and Form 19b–7 to 

require electronic filing with the 

Commission of SRO proposed rule 

changes would be a mandatory 

collection of information filed with the 

Commission as a means for the 

Commission to review, and, as required, 

take action with respect to SRO 

proposed rule changes. Any collection 

of information pursuant to the proposed 


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41However, consistent with applicable law, 

proposed SRO rule changes containing proprietary 

or otherwise sensitive information may be kept 

confidential and nonpublic, including requests 

submitted pursuant to the protection afforded for 

such information in the Freedom of Information 

Act, 5 U.S.C. 552. 

42As noted in the Paperwork Reduction Act 

analysis, the Commission staff based this total 

reporting burden of 159 hours for filing proposed 

rule changes and amendments + 8 hours for posting 

proposed rule changes and amendments on the 

SROs’ Web sites. 

amendments to require Web site posting 

by the SROs of their proposed and final 

rules would also be a mandatory 

collection of information. 

G. Responses to Collection of 

Information Will Not Be Kept 

Confidential 

Other than information for which an 

SRO requests confidential treatment and 

which may be withheld from the public 

in accordance with the provisions of 5 

U.S.C. 522, the collection of information 

pursuant to the proposed amendments 

to Rule 19b–7 and Form 19b–7 under 

the Act would not be confidential and 

would be publicly available.41

H. Request for Comment 

Pursuant to 44 U.S.C. 3505(c)(2)(B), 

the Commission solicits comments to: 

1. Evaluate whether the proposed 

collection of information is necessary 

for the performance of the functions of 

the agency, including whether the 

information shall have practical utility; 

2. Evaluate the accuracy of the 

agency’s estimate of the burden of the 

proposed collection of information; 

3. Enhance the quality, utility and 

clarity of the information to be 

collected; and 

4. Minimize the burden of collection 

of information on those who are to 

respond, including through the use of 

automated collection techniques or 

other forms of information technology. 

Persons wishing to submit comments 

on the collection of information 

requirements should direct them to the 

following persons: (1) Desk Officer for 

the Securities and Exchange 

Commission, Office of Information and 

Regulatory Affairs, OMB, Room 3208, 

New Executive Office Building, 

Washington, DC 20503; and (2) Nancy 

M. Morris, Secretary, Securities and 

Exchange Commission, Station Place, 

100 F Street, NE., Washington, DC 

20549–1090 with reference to File No. 

S7–06–07. OMB is required to make a 

decision concerning the collection of 

information between 30 and 60 days 

after publication, so a comment to OMB 

is best assured of having its full effect 

if OMB receives it within 30 days of 

publication. The Commission has 

submitted the proposed collection of 

information to OMB for approval. 

Requests for the materials submitted to 

OMB by the Commission with regard to 

this collection of information should be 

in writing, refer to File No. S7–06–07, 

and be submitted to the Securities and 

Exchange Commission, Records 

Management, Office of Filings and 

Information Services, Station Place, 100 

F Street, NE., Washington, DC 20549. 

V. Costs and Benefits of the Proposed 

Rulemaking 

The Commission is considering the 

costs and benefits of the proposed 

amendments to Rule 19b–7 and Form 

19b–7 discussed above. As noted above, 

the Commission staff estimates that the 

total annual paperwork reporting 

burden under the proposed rule would 

be 155 hours. The Commission staff, 

however, believes that there would be 

an overall reduction of costs based on 

the proposed amendments.42 The 

Commission encourages commenters to 

identify, discuss, analyze, and supply 

relevant data regarding any such costs 

or benefits. 

A. Benefits 

The proposed amendments are 

designed to modernize the filing, 

receipt, and processing of SRO proposed 

rule changes and to make the SRO rule 

filing process more efficient by 

conserving both SRO and Commission 

resources. The Commission believes 

that the proposed changes to Rule 19b–

7 and Form 19b–7 would permit SROs 

to file proposed rule changes with the 

Commission more quickly and 

economically. For example, SROs are 

currently required to pay for delivery 

costs of multiple paper copies to the 

Commission, as well as the costs 

associated with monitoring the 

Commission’s Public Reference Room 

for competitors’ rule filings. Requiring 

SROs to electronically file proposed rule 

changes under Rule 19b–7 should 

reduce expenses associated with clerical 

time, postage, and copying and should 

increase the speed, accuracy, and 

availability of information beneficial to 

investors, other SROs, and financial 

markets. 

The Commission does not expect that 

the proposed amendments would 

impose additional costs on SROs. 

Instead, the Commission believes that 

the proposed amendments to Rule 19b–

7 and Form 19b–7, on balance, would 

reduce costs related to the submission of 

SRO proposed rule changes. The 

technology for electronic filing would 

be web-based; therefore, the SRO should 

not have any material increase in 

technology expenditures for electronic 

filing because all SROs currently have 

access to the Internet. Accordingly, the 

Commission believes that the proposed 

amendments to Rule 19b–7 and Form 

19b–7, by requiring the SROs to submit 

proposed rule changes electronically, 

would reduce their costs. 

Because Commission staff would no 

longer manually process the receipt and 

distribution of SRO rule filings 

submitted on Form 19b–7, electronic 

filing would also expedite the 

Commission’s receipt of SRO proposed 

rule changes filed under Rule 19b–7 and 

provide the SROs with the certainty that 

the Commission has received the 

proposed rule changes and has captured 

pertinent information about the rule 

changes in SRTS. Based on the 

Commission’s experience with 

electronic filing of Form 19b–4, the 

Commission believes that integrating 

this electronic filing technology with 

SRTS should also enhance the 

Commission’s ability to monitor and 

process SRO proposed rule changes. 

Moreover, requiring SROs to post 

proposed rule changes filed under Rule 

19b–7 on their Web sites no later than 

two business days after filing with the 

Commission should increase availability 

of SRO proposed rules and thereby 

facilitate the ability of interested parties 

to comment on proposed rule changes. 

For instance, the posting of these 

proposed rule changes would provide 

the public with access to the filings on 

the SROs’ Web sites and thereby reduce 

the burden on SRO and Commission 

staff of providing information about 

proposed rule changes to interested 

parties. The Commission believes that 

the posting of the proposed rule changes 

submitted on Form 19b–7 would also 

save SRO resources that are currently 

being used to monitor the Commission’s 

Public Reference Room for competitors’

proposed rule changes. 

B. Costs 

As noted, the Commission staff 

estimates that the annual paperwork 

reporting costs would be 155 hours 

under the proposed rule. If the proposed 

changes were adopted, the Commission 

believes that SROs could incur some 

costs associated with training their 

personnel about the procedures for 

submitting proposed rule changes 

electronically and submission of the 

information via EAUF. However, the 

Commission believes that such costs 

would be one-time costs and 

insubstantial since the SROs are already 

familiar with the information required 

in filing a proposed rule change with 

the Commission and would only be 

required to submit the same information 


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43The Commission staff estimates that each SRO 

will purchase five of their staff such digital IDs. 

Thus, the annual cost of the digital ID for all SROs 

would be $500 (5 SROs × $20 × 5). 

44See Section F of the Instructions to Form 19b–

4. 

45 15 U.S.C. 78c(f). 

46 15 U.S.C. 78w(a)(2). 

47 5 U.S.C. 601 et seq. 48 5 U.S.C. 603(a). 49 5 U.S.C. 551 et seq. 50Although Section 601(b) of the RFA defines the 

term ‘‘small entity,’’ the statute permits agencies to 

formulate their own definitions. The Commission 

has adopted definitions for the term small entity for 

the purposes of Commission rulemaking in 

accordance with the RFA. Those definitions, as 

relevant to this proposed rulemaking, are set forth 

in Rule 0–10, 17 CFR 240.0–10. See Securities 

Exchange Act Release No. 18451 (January 28, 1982), 

47 FR 5215 (February 4, 1982). 

51See 17 CFR 240.0–10(e). Paragraph (e) of Rule 

0–10 states that the term ‘‘small business,’’ when 

referring to an exchange, means any exchange that 

has been exempted from the reporting requirements 

of Rule 601 of Regulation NMS, 17 CFR 242.601, 

and is not affiliated with any person (other than a 

natural person) that is not a small business or small 

organization as defined in Rule 0–10. Under this 

standard, none of the exchanges subject to the 

proposed amendments to Rule 19b-7 and Form 19b7 is a ‘‘small entity’’ for the purposes of the RFA. 

In addition, the NFA is not a ‘‘small entity’’ for 

purposes of the RFA. See Securities Exchange Act 

Release No. 44279 (May 8, 2001), 66 FR 26978, 

26990 (May 15, 2001) (S7–10–01) (Rule 19b-7 

Proposing Release). 

electronically under this proposal. The 

Commission believes that the total 

amount of one-time costs that SROs 

would incur in training personnel how 

to use EAUF is 50 hours. The 

Commission staff believes that the SROs 

could also incur some minimal costs 

(currently $20 per year) associated with 

purchasing digital IDs for each duly 

authorized officer electronic 

signatories.43 The Commission also 

believes that the SROs would have to 

make temporary adjustments to their 

recordkeeping procedures since, under 

the proposal, the SROs would be 

required to print out the Form 19b–7 

signature block, manually sign proposed 

rule changes, and retain the manual 

signature for not less than five years. 

However, there should be no additional 

costs associated with such 

recordkeeping as SROs are currently 

required to retain the Form 19b–7 for 

not less than five years. The 

Commission requests comment on the 

anticipated costs, if any, on SROs to 

comply with the proposed requirement 

of retaining a manual signature of each 

proposed rule change submitted 

electronically. 

Moreover, the Commission believes 

that the proposed requirement that 

SROs post proposed rule changes on 

their Web sites would impose some but 

not substantial costs on most SROs. The 

Commission notes that no new costs 

will be associated with posting a current 

and complete version of their rules on 

their Web site because currently all 

SROs promptly post this information on 

their Web sites pursuant to Rule 19b–

4(m). In addition, the Commission does 

not anticipate that SROs would incur 

any material additional costs in 

complying with the change to Form 

19b–4, which proposes to add the word 

‘‘officer’’ to the Signature Box because 

the addition of the word simply 

provides transparency to an obligation 

that already exists.44 Therefore, at all 

times, each SRO should maintain a 

current and complete set of its rules to 

facilitate compliance with this 

requirement. Accordingly, the 

Commission does not believe that SROs 

would incur substantial costs in simply 

posting this information on their Web 

sites because they should already be 

doing so. 

C. Request for Comment 

The Commission requests data to 

quantify the costs and the benefits 

above. The Commission seeks estimates 

of these costs and benefits, as well as 

any costs and benefits not already 

defined, which could result from the 

adoption of these proposed amendments 

to Rule 19b–7 and Form 19b–7. 

Specifically, the Commission requests 

commenters to address whether 

proposed amendments to Rule 19b–7 

and Form 19b–7 that would require 

electronic filing of SRO proposed rule 

changes and the posting of these 

proposed rule changes on the SROs’

Web sites would generate the 

anticipated benefits or impose any 

unanticipated costs on the SROs and the 

public. 

VI. Consideration of the Burden on 

Competition, Promotion of Efficiency, 

and Capital Formation 

Section 3(f) of the Act 45 requires the 

Commission, whenever it engages in 

rulemaking and is required to consider 

or determine whether an action is 

necessary or appropriate in the public 

interest, to consider whether the action 

will promote efficiency, competition, 

and capital formation. In addition, 

Section 23(a)(2) of the Act 46 requires 

the Commission, when promulgating 

rules under the Act, to consider the 

impact any such rules would have on 

competition. Section 23(a)(2) further 

provides that the Commission may not 

adopt a rule that would impose a 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

The proposed amendments to Rule 

19b–7 and Form 19b–7 are intended to 

modernize the receipt and review of 

SRO proposed rule changes and to make 

the SRO rule filing process more 

efficient by conserving both SRO and 

Commission resources. They also are 

intended to improve the transparency of 

the SRO rule filing process and facilitate 

access to current and complete sets of 

SRO rules. In addition, none of these 

changes would have an adverse impact 

on competition or capital formation and 

they would therefore benefit investors. 

The Commission generally requests 

comment on the competitive or 

anticompetitive effects of these 

amendments to Rule 19b–7 and Form 

19b–7 on any market participants if 

adopted as proposed. The Commission 

also requests comment on what impact 

the amendments, if adopted, would 

have on efficiency and capital 

formation. Commenters should provide 

analysis and empirical data to support 

their views on the costs and benefits 

associated with the proposal. 

VII. Regulatory Flexibility Act 

Certifications 

The Regulatory Flexibility Act 

(‘‘RFA’’) 47 requires Federal agencies, in 

promulgating rules, to consider the 

impact of those rules on small entities. 

Section 603(a) 48 of the Administrative 

Procedure Act,49 as amended by the 

RFA, generally requires the Commission 

to undertake a regulatory flexibility 

analysis of all proposed rules, or 

proposed rule amendments, to 

determine the impact of such 

rulemaking on ‘‘small entities.’’50

Section 605(b) of the RFA specifically 

states that this requirement shall not 

apply to any proposed rule, or proposed 

rule amendment, which if adopted, 

would not ‘‘have a significant economic 

impact on a substantial number of small 

entities.’’

Proposed amendments to Rules 19b–

7 and Form 19b–7 would require SROs 

to electronically file proposed rule 

changes submitted pursuant to Section 

19(b)(7)(A) of the Act and require SROs 

to post all such proposed rule changes 

on their Web sites. Only exchanges 

registered with the Commission under 

Section 6(g) of the Act and national 

securities associations registered with 

the Commission under Section 15A(k) 

of the Act would be subject to the 

proposed amendments to Rule 19b–7 

and Form 19b–7. None of the exchanges 

registered under Section 6(g) or national 

securities associations registered with 

the Commission under Section 15A(k) 

that would be subject to the proposed 

amendments are ‘‘small entities’’ for 

purposes of the Regulatory Flexibility 

Act.51

In addition, the proposal would make 

certain conforming changes to Rule 


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52See 17 CFR 240.0–10(e). Under this standard, 

described supra in note 51, none of the exchanges 

affected by the proposed amendments to Rule 19b–

4 and Form 19b–4 is a small entity for the purposes 

of the RFA. The Commission has also found that 

NASD is not a small entity. 

19b–4 and Form 19b–4. National 

securities exchanges and national 

securities associations that would be 

subject to the proposed amendments to 

Rule 19b–4 and Form 19b–4 are not 

‘‘small entities’’ for the purposes of the 

RFA.52

For the above reasons, the 

Commission certifies that the proposed 

amendments to Rule 19b–4 and 19b–7 

and Form 19b–4 and 19b–7, if adopted, 

would not have a significant economic 

impact on a substantial number of small 

entities for purposes of the Regulatory 

Flexibility Act. The Commission invites 

commenters to address whether the 

proposed rules would have a significant 

economic impact on a substantial 

number of small entities, and, if so, 

what would be the nature of any impact 

on small entities. The Commission 

requests that commenters provide 

empirical data to support the extent of 

such impact. 

VIII. Statutory Basis and Text of 

Proposed Amendments 

The amendments to Rule 19b–7 and 

Form 19b–7 under the Act are being 

proposed pursuant to 15 U.S.C. 78a et 

seq., particularly sections 3(b), 6, 15A, 

19(b), and 23(a) of the Act. 

List of Subjects in 17 CFR Parts 240 and 

249 

Reporting and recordkeeping 

requirements, Securities. 

In accordance with the foregoing, 

Title 17, Chapter II of the Code of 

Federal Regulations is proposed to be 

amended as follows: 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

1. The authority citation for Part 240 

continues to read in part as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 

77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, 

78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78p, 

78q, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 80a–

20, 80a–23, 80a–29, 80a–37, 80b–3, 80b–4, 

80b–11, and 7201 et seq.; and 18 U.S.C. 1350, 

unless otherwise noted. 

* * * * * 

2. Section 240.19b–4 is amended by 

revising paragraph (m) to read as 

follows: 

§ 240.19b–4 Filings with respect to 

proposed rule changes by self-regulatory 

organizations. 

* * * * * 

(m) Each self-regulatory organization 

shall post and maintain a current and 

complete version of its rules on its Web 

site. The self-regulatory organization 

shall update its Web site to reflect rule 

changes filed pursuant to section 

19(b)(2) of the Act (15 U.S.C. 78s(b)(2)) 

within two business days after it has 

been notified of the Commission’s 

approval of a proposed rule change, and 

to reflect rule changes filed pursuant to 

section 19(b)(3)(A) of the Act (15 U.S.C. 

78s(b)(3)(A)) within two days of the 

Commission’s notice of such proposed 

rule change. If a rule change is not 

effective for a certain period, the selfregulatory organization shall clearly 

indicate the effective date in the 

relevant rule text. 

* * * * * 

3. Section 240.19b–7 is amended by: 

a. Adding a preliminary note; 

b. Revising paragraphs (a) and (b)(1); 

and 

c. Adding paragraphs (d), (e), (f) and 

(g). 

The additions and revisions read as 

follows: 

§ 240.19b–7 Filings with respect to 

proposed rule changes submitted pursuant 

to Section 19(b)(7) of the Act. 

Preliminary Note: A self-regulatory 

organization also must refer to Form 19b–7 

(17 CFR 249.822) for further requirements 

with respect to the filing of proposed rule 

changes. 

(a) Filings with respect to proposed 

rule changes by a self-regulatory 

organization submitted pursuant to 

section 19(b)(7) of the Act (15 U.S.C. 

78s(b)(7)) shall be made electronically 

on Form 19b–7 (17 CFR 249.822). 

(b) * * * 

(1) A completed Form 19b–7 (17 CFR 

249.822) is submitted electronically; 

and 

* * * * * 

(d) Filings with respect to proposed 

rule changes by a self-regulatory 

organization submitted on Form 19b–7 

(17 CFR 249.822) electronically shall 

contain an electronic signature. For the 

purposes of this section, the term 

electronic signature means an electronic 

entry in the form of a magnetic impulse 

or other form of computer data 

compilation of any letter or series of 

letters or characters comprising a name, 

executed, adopted or authorized as a 

signature. The signatory to an 

electronically submitted rule filing shall 

manually sign a signature page or other 

document, in the manner prescribed by 

Form 19b–7, authenticating, 

acknowledging or otherwise adopting 

his or her signature that appears in 

typed form within the electronic filing. 

Such document shall be executed before 

or at the time the rule filing is 

electronically submitted and shall be 

retained by the filer in accordance with 

17 CFR 240.17a–1. 

(e) If the conditions of this section 

and Form 19b–7 (17 CFR 249.822) are 

otherwise satisfied, all filings submitted 

electronically on or before 5:30 p.m. 

Eastern Standard Time or Eastern 

Daylight Saving Time, whichever is 

currently in effect, on a business day, 

shall be deemed filed on that business 

day, and all filings submitted after 5:30 

p.m. Eastern Standard Time or Eastern 

Daylight Saving Time, whichever is 

currently in effect, shall be deemed filed 

on the next business day. 

(f) The self-regulatory organization 

shall post the proposed rule change, and 

any amendments thereto, submitted on 

Form 19b–7 (17 CFR 249.822), on its 

Web site within two business days after 

the filing of the proposed rule change, 

and any amendments thereto, with the 

Commission. Unless the self-regulatory 

organization withdraws the proposed 

rule change or is notified that the 

proposed rule change is not properly 

filed, such proposed rule change and 

amendments shall be maintained on the 

self-regulatory organization’s Web site 

until 60 days after: 

(1) The filing of a written certification 

with the Commodity Futures Trading 

Commission under section 5c(c) of the 

Commodity Exchange Act (7 U.S.C. 7a–

2(c)); 

(2) The Commodity Futures Trading 

Commission determines that review of 

the proposed rule change is not 

necessary; or 

(3) The Commodity Futures Trading 

Commission approves the proposed rule 

change; and 

(4) In the case of a proposed rule 

change, or any amendment thereto, that 

has been withdrawn or not properly 

filed, the self-regulatory organization 

shall remove the proposed rule change, 

or any amendment, from its Web site 

within two business days of notification 

of improper filing or withdrawal by the 

self-regulatory organization of the 

proposed rule change. 

(g) Each self-regulatory organization 

shall post and maintain a current and 

complete version of its rules on its Web 

site. The self-regulatory organization 

shall update its Web site to reflect rule 

changes filed pursuant to section 

19(b)(7) of the Act (15 U.S.C. 78s(b)(7)) 

within two business days after it takes 

effect upon filing of a written 

certification with the Commodity 

Futures Trading Commission under 


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section 5c(c) of the Commodity 

Exchange Act (7 U.S.C. 7a–2(c)), upon a 

determination by the Commodity 

Futures Trading Commission that 

review of the proposed rule change is 

not necessary, or upon approval by the 

Commodity Futures Trading 

Commission. If a rule change is not 

effective for a certain period, the selfregulatory organization shall clearly 

indicate the effective date in the 

relevant rule text. 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

4. The authority citation for Part 249 

continues to read in part as follows: 

Authority: 15 U.S.C. 78a et seq. and 7201 

et seq.; and 18 U.S.C. 1350, unless otherwise 

noted. 

5. Section 249.822 is revised to read 

as follows: 

§ 249.822 Form 19b–7, for electronic filing 

with respect to proposed rule changes by 

self-regulatory organizations under Section 

19(b)(7)(A) of the Securities Exchange Act 

of 1934. 

This form shall be used by selfregulatory organizations, as defined in 

section 3(a)(25) of the Securities 

Exchange Act of 1934 (15 U.S.C. 

78c(a)(25)), to file electronically 

proposed rule changes with the 

Commission pursuant to section 19(b)(7) 

of the Act (15 U.S.C. 78s(b)(7)) and 

§ 240.19b–7 of this chapter. 

6. Form 19b–7 (referenced in 

§ 249.822) is revised to read as follows: 

[Note: Form 19b–7 is attached as Appendix 

A to this document.] 

[Note: The text of Form 19b–7 will not 

appear in the Code of Federal Regulations.] 

Dated: February 23, 2007. 

By the Commission. 

Nancy M. Morris, 

Secretary. 

Appendix A—General Instructions for 

Form 19b–7 

A. Use of the Form 

All self-regulatory organization proposed 

rule changes submitted pursuant to Section 

19(b)(7) of the Securities Exchange Act of 

1934 (‘‘Act’’), shall be filed electronically 

through the Electronic Form Filing System 

(‘‘EFFS’’), a secure Web site operated by the 

Commission. This form shall be used for 

filings of proposed rule changes by all selfregulatory organizations pursuant to Section 

19(b)(7) of the Act. National securities 

exchanges registered pursuant to Section 6(g) 

of the Act and limited purpose national 

securities associations registered pursuant to 

Section 15A(k) of the Act are self-regulatory 

organizations for purposes of this form. 

B. Need for Careful Preparation of the 

Completed Form, Including Exhibits 

This form, including the exhibits, is 

intended to elicit information necessary for 

the public to provide meaningful comment 

on the proposed rule change and for the 

Commission to determine whether abrogation 

of the proposal is appropriate because it 

unduly burdens competition or efficiency, 

conflicts with the securities laws, or is 

inconsistent with the public interest and the 

protection of investors. The self-regulatory 

organization must provide all the information 

called for by the form, including the exhibits, 

and must present the information in a clear 

and comprehensible manner. 

The proposed rule change shall be 

considered filed with the Commission on the 

date on which the Commission receives the 

proposed rule change if the filing complies 

with all requirements of this form. Any filing 

that does not comply with the requirements 

of this form may be returned to the selfregulatory organization at any time before the 

issuance of the notice of filing. Any filing so 

returned shall for all purposes be deemed not 

to have been filed with the Commission. See 

also Rule 0–3 under the Act (17 CFR 240.0–

3). 

C. Documents Comprising the Completed 

Form 

The completed form filed with the 

Commission shall consist of the Form 19b–

7 Page 1, numbers and captions for all items, 

responses to all items, and exhibits required 

in Instruction H. In responding to an item, 

the completed form may omit the text of the 

item as contained herein if the response is 

prepared to indicate to the reader the 

coverage of the item without the reader 

having to refer to the text of the item or its 

instructions. Each filing shall be marked on 

the Form 19b–7 with the initials of the selfregulatory organization, the four-digit year, 

and the number of the filing for the year (i.e., 

SRO–YYYY–XX). If the self-regulatory 

organization is filing Exhibit 2 or 3 via paper, 

the exhibits must be filed within 5 business 

days of the electronic submission of all other 

required documents. 

D. Amendments 

If information on this form is or becomes 

inaccurate before the proposed rule change 

becomes effective, the self-regulatory 

organization shall file amendments 

correcting any such inaccuracy. Amendments 

shall be filed as specified in Instruction E. 

Amendments to a filing shall include the 

Form 19b–7 Page 1 marked to number 

consecutively the amendments, numbers and 

captions for each amended item, amended 

response to the item, and required exhibits. 

The amended description in Section II. A. 1. 

of Exhibit 1 shall explain the purpose of the 

amendment and, if the amendment changes 

the purpose of or basis for the proposed rule 

change, the amended response shall also 

provide a revised purpose and basis 

statement for the proposed rule change. 

Exhibit 1 shall be re-filed if there is a 

material change from the immediately 

preceding filing in the language of the 

proposed rule change or in the information 

provided. 

If the amendment alters the text of an 

existing rule, the amendment shall include 

the text of the existing rule, marked in the 

manner described in Section I. of Exhibit 1 

using brackets to indicate words to be deleted 

from the existing rule and underscoring to 

indicate words to be added. The purpose of 

this marking requirement is to maintain a 

current copy of how the text of the existing 

rule is being changed. 

If the self-regulatory organization is 

amending only part of the text of a lengthy 

proposed rule change, it may, with the 

Commission’s permission, file only those 

portions of the text of the proposed rule 

change in which changes are being made if 

the filing (i.e., partial amendment) is clearly 

understandable on its face. Such partial 

amendment shall be clearly identified and 

marked to show deletions and additions. 

If, after the rule change is filed but before 

it becomes effective, the self-regulatory 

organization receives or prepares any 

correspondence or other communications 

reduced to writing (including comment 

letters) to and from such self-regulatory 

organization concerning the proposed rule 

change, the communications shall be filed as 

Exhibit 2. If information in the 

communication makes the rule change filing 

inaccurate, the filing shall be amended to 

correct the inaccuracy. If such 

communications cannot be filed 

electronically in accordance with Instruction 

E, the communications shall be filed in 

accordance with Instruction F. 

E. Signature and Filing of the Completed 

Form 

All proposed rule changes, amendments, 

extensions, and withdrawals of proposed rule 

changes shall be filed through the EFFS. In 

order to file Form 19b–7 through EFFS, selfregulatory organizations must request access 

to the SEC’s External Application Server by 

completing a request for an external account 

user ID and password for the use of the 

External Application User Authentication 

Form. 

Initial requests will be received by 

contacting the Market Regulation 

Administrator located on our Web site 

(http://www.sec.gov). An e-mail will be sent 

to the requestor that will provide a link to a 

secure Web site where basic profile 

information will be requested. 

A duly authorized officer of the selfregulatory organization shall electronically 

sign the completed Form 19b–7 as indicated 

on Page 1 of the Form. In addition, a duly 

authorized officer of the self-regulatory 

organization shall manually sign one copy of 

the completed Form 19b–7, and the manually 

signed signature page shall be maintained 

pursuant to Section 17 of the Act. 

F. Procedures for Submission of Paper 

Documents for Exhibits 2 and 3 

To the extent that Exhibit 2 or 3 cannot be 

filed electronically in accordance with 

Instruction E, four copies of Exhibit 2 or 3 

shall be filed with the Division of Market 

Regulation, Securities and Exchange 

Commission, 100 F Street, NE., Washington, 

DC 20549–6628. Page 1 of the electronic 

Form 19b–7 shall accompany paper 


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submissions of Exhibit 2 or 3. If the selfregulatory organization is filing Exhibit 2 or 

3 via paper, they must be filed within five 

days of the electronic filing of all other 

required documents. 

G. Withdrawals of Proposed Rule Changes 

If a self-regulatory organization determines 

to withdraw a proposed rule change, it must 

complete Page 1 of the Form 19b–7 and 

indicate by selecting the appropriate check 

box to withdraw the filing. 

H. Exhibits 

List of exhibits to be filed, as specified in 

Instructions C and D: 

Exhibit 1. Completed Notice of Proposed 

Rule Change for publication in the Federal 

Register. It is the responsibility of the selfregulatory organization to prepare Items I, II 

and III of the notice. Leave a 1-inch margin 

at the top, bottom, and right hand side, and 

a 11⁄2 inch margin at the left hand side. 

Number all pages consecutively. Double 

space all primary text and single space lists 

of items, quoted material when set apart from 

primary text, footnotes, and notes to tables. 

Amendments to Exhibit 1 should be filed in 

accordance with Instructions D and E. 

Exhibit 2. (a) Copies of notices issued by 

the self-regulatory organization soliciting 

comment on the proposed rule change and 

copies of all written comments on the 

proposed rule change received by the selfregulatory organization (whether or not 

comments were solicited), presented in 

alphabetical order, together with an 

alphabetical listing of such comments. If 

such notices and comments cannot be filed 

electronically in accordance with Instruction 

E, the notices and comments shall be filed in 

accordance with Instruction F. 

(b) Copies of any transcript of comments 

on the proposed rule change made at any 

public meeting or, if a transcript is not 

available, a copy of the summary of 

comments on the proposed rule change made 

at such meeting. If such transcript of 

comments or summary of comments cannot 

be filed electronically in accordance with 

Instruction E, the transcript of comments or 

summary of comments shall be filed in 

accordance with Instruction F. 

(c) Any correspondence or other 

communications reduced to writing 

(including comment letters and e-mails) 

concerning the proposed rule change 

prepared or received by the self-regulatory 

organization. All correspondence or other 

communications should be presented in 

alphabetical order together with an 

alphabetical listing of the authors, and shall 

be filed in accordance with Instruction E. If 

such communications cannot be filed 

electronically in accordance with Instruction 

E, the communications shall be filed in 

accordance with Instruction F. 

(d) If after the proposed rule change is filed 

but before it becomes effective, the selfregulatory organization prepares or receives 

any correspondence or other 

communications reduced to writing 

(including comment letters and e-mails) to 

and from such self-regulatory organization 

concerning the proposed rule change, the 

communications shall be filed in accordance 

with Instruction E. All correspondence or 

other communications should be presented 

in alphabetical order together with an 

alphabetical listing of the authors. If such 

communications cannot be filed 

electronically in accordance with Instruction 

E, the communications shall be filed in 

accordance with Instruction F. 

Exhibit 3. If any form, report, or 

questionnaire is 

(a) Proposed to be used in connection with 

the implementation or operation of the 

proposed rule change, or 

(b) Prescribed or referred to in the 

proposed rule change, then the form, report, 

or questionnaire must be attached and shall 

be considered as part of the proposed rule 

change. If completion of the form, report or 

questionnaire is voluntary or is required 

pursuant to an existing rule of the selfregulatory organization, then the form, 

report, or questionnaire, together with a 

statement identifying any existing rule that 

requires completion of the form, report, or 

questionnaire, shall be attached as Exhibit 3. 

If the form, report, or questionnaire cannot be 

filed electronically in accordance with 

Instruction E, the documents shall be filed in 

accordance with Instruction F. 

Exhibit 4. The self-regulatory organization 

must attach as Exhibit 4 proposed changes to 

its rule text. Changes in, additions to, or 

deletions from, any existing rule shall be set 

forth with brackets used to indicate words to 

be deleted and underscoring used to indicate 

words to be added. Exhibit 4 shall be 

considered part of the proposed rule change. 

Exhibit 5. The self-regulatory organization 

must attach one of the following: 

Certificate of Effectiveness of Proposed 

Rule Change: Attach a copy of the 

certification submitted to the CFTC pursuant 

to Section 5c(c) of the Commodity Exchange 

Act. 

CFTC Request or Determination that 

Review of the Proposed Rule Change is Not 

Necessary: Attach a copy of any request 

submitted to the CFTC for determination that 

review of the proposed rule change is not 

necessary and any indication from the CFTC 

that it has determined that review of the 

proposed rule change is not necessary. 

Request for CFTC Approval of Proposed 

Rule Change: Attach a copy of any request 

submitted to the CFTC for approval of the 

proposed rule change and any indication 

received from the CFTC that the proposed 

rule change has been approved. 

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53 15 U.S.C. 78s(b)(7). 

54To be completed by the Commission. This date 

will be the date on which the Commission receives 

the proposed rule change filing if the filing 

complies with all requirements of this form. See 

General Instructions for Form 19b–7. 

Information To Be Included in the 

Completed Exhibit 1 

SECURITIES AND EXCHANGE 

COMMISSION 

(Release No. 34– File No. SR–

[SRO Name]–[YYYY]–[XX]) 

Self-Regulatory Organizations; 

Proposed Rule Change by [Name of SelfRegulatory Organization] Relating to 

[brief description of the subject matter 

of the proposed rule change]. 

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

Securities Exchange Act of 1934 

(‘‘Act’’),53 notice is hereby given that on 

[date 54], the [name of self-regulatory 

organization] filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change described in Items I, II, and III 

below, which Items have been prepared 

by the self-regulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. [Name 

of self-regulatory organization] also has 

filed this proposed rule change 

concurrently with the Commodity 

Futures Trading Commission (‘‘CFTC’’). 

[Section 19(b)(7)(B) provides that a 

proposed rule change may take effect 

upon the occurrence of one of three 

events. The self-regulatory organization 

should include one of the following 

sentences, whichever is applicable:] 

The [name of self-regulatory 

organization] filed a written certification 

with the CFTC under Section 5c(c) of 

the Commodity Exchange Act on [date]; 

or 

The [name of self-regulatory 

organization] on [date], has requested 

that the CFTC make a determination 

that review of the proposed rule change 

of the [self-regulatory organization] is 

not necessary. The CFTC has [made 

such determination on [date]]; or [has 

not made such determination]; or 

The [name of self-regulatory 

organization] on [date] submitted the 

proposed rule change to the CFTC for 

approval. The CFTC [approved the 

proposed rule change on [date]]; or [has 

not approved the proposed rule change]. 

I. Self-Regulatory Organization’s 

Description and Text of the Proposed 

Rule Change 

[Supply a brief statement of the terms 

of substance of the proposed rule 

change. 

If the proposed rule change is 

relatively brief, a separate statement 

need not be prepared, and the text of the 

proposed rule change may be inserted in 

lieu of the statement of the terms of 

substance. If the proposed rule change 

amends an existing rule, indicate the 

changes in the rule by brackets for 

words to be deleted and underscoring 

for words to be added.] 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization 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. 

The self-regulatory organization 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 

[Provide a statement of the purpose of 

the proposed rule change. The statement 

must describe the text of the proposed 

rule change in a sufficiently detailed 

and specific manner as to enable the 

public to provide meaningful comment 

on the proposal. At a minimum, the 

statement should: 

(a) [Describe the reasons for adopting 

the proposed rule change, any problems 

the proposed rule change is intended to 

address, the manner in which the 

proposed rule change will resolve those 

problems, the manner in which the 

proposed rule change will affect various 

persons (e.g. brokers, dealers, issuers, 

and investors), and any significant 

problems known to the self-regulatory 

organization that persons affected are 

likely to have in complying with the 

proposed rule change; and] 

(b) [Describe how the proposed rule 

change relates to existing rules of the 

self-regulatory organization. If the selfregulatory organization reasonably 

expects that the proposed rule change 

will have any direct effect, or significant 

indirect effect, on the application of any 

other rule of the self-regulatory 

organization, set forth the designation or 

title of any such rule and describe the 

anticipated effect of the proposed rule 

change on the application of such other 

rule. Include the file numbers for prior 

filings with respect to any existing rule 

specified.] 

2. Statutory Basis 

[Explain why the proposed rule 

change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

the self-regulatory organization. A mere 

assertion that the proposed rule change 

is consistent with those requirements is 

not sufficient. Certain limitations that 

the Act imposes on self-regulatory 

organizations are summarized in the 

notes that follow. 

Note 1. National Securities Exchanges. 

Under Section 6 of the Act, rules of a 

national securities exchange may not permit 

unfair discrimination between customers, 

issuers, brokers, or dealers, and may not 

regulate, by virtue of any authority conferred 

by the Act, matters not related to the 

purposes of the Act or the administration of 

the self-regulatory organization. 

Note 2. Limited Purpose National 

Securities Associations. Under Section 

15A(k) of the Act, rules of a national 

securities association registered for the 

limited purpose of regulating the activities of 

members who are registered as brokers or 

dealers in security futures products 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, including rules governing sales 

practices and the advertising of security 

futures products reasonably comparable to 

those of other national securities associations 

registered pursuant to Section 15A(a) that are 

applicable to security futures products. The 

rules may not be designed to regulate, by 

virtue of any authority conferred by the Act, 

matters not related to the purposes of the Act 

or the administration of the association.] 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

[The information required by this 

section must be sufficiently detailed and 

specific to support the premise that the 

proposed rule change does not unduly 

burden competition. In responding to 

this section, the self-regulatory 

organization must: 

• State whether the proposed rule 

change will have an impact on 

competition and, if so 

(i) State whether the proposed rule 

change will impose any burden on 

competition or whether it will relieve 

any burden on, or otherwise promote, 

competition, and 

(ii) Specify the particular categories 

of persons and kinds of businesses on 

which any burden will be imposed and 

the ways in which the proposed rule 

change will affect them. 

• Explain why any burden on 

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55 17 CFR 200.30–3(a)(73). 

regulatory organization does not believe 

that the burden on competition is 

significant, explain why. 

In providing those explanations, set 

forth and respond in detail to written 

comments as to any significant impact 

or burden on competition perceived by 

any person who has made comments on 

the proposed rule change to the selfregulatory organization.] 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

[If written comments were received 

(whether or not comments were 

solicited) from members of or 

participants in the self-regulatory 

organization or others, summarize the 

substance of all such comments 

received and respond in detail to any 

significant issues that those comments 

raised about the proposed rule change. 

If an issue is summarized and 

responded to in detail under Section 

II.A.1. or Section II.B. of this Form 19b–

7 Notice, that response need not be 

duplicated if appropriate cross-reference 

is made to the place where the response 

can be found. If comments were not or 

are not to be solicited, so state.] 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

[The self-regulatory organization shall 

include the following with the 

applicable phrase on the proposed rule 

change’s effectiveness:] 

The proposed rule change has become 

effective on [insert date of filing of 

written certification with the CFTC 

under Section 5c(c) of the Commodity 

Exchange Act; or the date of 

determination by the CFTC that review 

of the proposed rule change is not 

necessary; or the date of approval of the 

proposed rule change by the CFTC]. [or] 

The proposed rule change is not 

effective because the CFTC [has not 

determined that review of the proposed 

rule changes is not necessary or has not 

approved the proposed rule change]. 

At any time within 60 days of the date 

of effectiveness of the proposed rule 

change, the Commission, after 

consultation with the CFTC, may 

summarily abrogate the proposed rule 

change and require that the proposed 

rule change be refiled in accordance 

with the provisions of Section 19(b)(1) 

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–[SRO]–[YYYY]–[XX] 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–[SRO]–[YYYY]–[XX]. 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 [SRO]. 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 publicly available. All 

submissions should refer to File 

Number SR–[SRO]–[YYYY]–[XX] and 

should be submitted on or before March 

22, 2007. 

For the Commission, by the Division 

of Market Regulation, pursuant to 

delegated authority.55

Secretary. 

Appendix B 


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[FR Doc. 07–917 Filed 2–28–07; 8:45 am] 

BILLING CODE 8010–01–C 


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