Federal Register / Vol. 73, No. 153 / Thursday, August 7, 2008 / Notices 46111 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(1). 

5The current FINRA rulebook consists of two sets 

of rules: (1) NASD Rules and (2) rules incorporated 

from NYSE (‘‘Incorporated NYSE Rules’’). While the 

NASD Rules generally apply to all FINRA members, 

the Incorporated NYSE Rules apply only to 

members of both FINRA and the NYSE, referred to 

as Dual Members. 

6See Exchange Act Release No. 55471 (March 14, 

2007), 72 FR 13149 (March 20, 2007) (Notice of 

Filing and Immediate Effectiveness of SR–NASD–

2007–013). 

7See Exchange Act Release No. 54918 (December 

12, 2006), 71 FR 75790 (December 18, 2006) (SR–

NYSE–2006–13, relating to further amendments to 

the NYSE’s portfolio margin pilot program); 

Exchange Act Release No. 54125 (July 11, 2006), 71 

FR 40766 (July 18, 2006) (SR–NYSE–2005–93, 

relating to amendments to the NYSE’s portfolio 

margin pilot program); Exchange Act Release No. 

52031 (July 14, 2005) 70 FR 42130 (July 21, 2005) 

(SR–NYSE–2002–19, relating to the NYSE’s original 

portfolio margin pilot). See also Exchange Act 

Release No. 54919 (December 12, 2006), 71 FR 

75781 (December 18, 2006) (SR–CBOE–2006–14, 

relating to amendments to the CBOE’s portfolio 

margin pilot); Exchange Act Release No. 52032 (July 

14, 2005) 70 FR 42118 (July 21, 2005) (SR–CBOE–

2002–03, relating to the CBOE’s original portfolio 

margin pilot). 

8See Exchange Act Release No. 56108 (July 19, 

2007) 72 FR 41375 (July 27, 2007) (Notice of Filing 

and Immediate Effectiveness of SR–NASD–2007–

045). See also Exchange Act Release No. 56107 (July 

19, 2007) 72 FR 41377 (July 27, 2007) (Notice of 

Filing and Immediate Effectiveness of SR–NYSE–

2007–56, relating to extension of the NYSE portfolio 

margin pilot program to July 31, 2008) and 

Exchange Act Release No. 56109 (July 19, 2007) 72 

FR 41365 (July 27, 2007) (Notice of Filing and 

Immediate Effectiveness of SR–CBOE–2007–75, 

relating to extension of the CBOE portfolio margin 

pilot program to July 31, 2008). 

9See SR–FINRA–2008–041 and SR–CBOE–2008–

73. 

10See http://www.finra.org/RulesRegulation/ 

PublicationsGuidance/p038849. 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–FINRA–2008–040 and 

should be submitted on or before 

August 28, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–18160 Filed 8–6–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58263; File No. SR–FINRA–

2008–042] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to Amendments 

to Portfolio Margin 

July 30, 2008. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on July 25, 

2008, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) (f/k/a 

National Association of Securities 

Dealers, Inc. (‘‘NASD’’)) filed with the 

Securities and Exchange Commission 

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

rule change as described in Items I, II, 

and III below, which Items have been 

substantially prepared by FINRA. 

FINRA has designated the proposed rule 

change as ‘‘constituting a stated policy, 

practice, or interpretation with respect 

to the meaning, administration, or 

enforcement of an existing rule’’ under 

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

Rule 19b–4(f)(1) thereunder,4 which 

renders the proposal effective upon 

receipt of this filing by the Commission. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to codify FINRA’s 

interpretation of the portfolio margin 

program set forth in NASD Rule 2520(g) 

and Incorporated NYSE Rule 431(g) 5

regarding (1) monitoring concentrated 

equity positions and (2) timing of day 

trading margin calls. The text of the 

proposed rule change is available at 

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

offices of FINRA, and the Commission’s 

Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

On February 12, 2007, FINRA (then 

known as NASD) filed SR–NASD–2007–

013 for immediate effectiveness to 

establish a portfolio margin pilot 

program that permits member firms to 

elect to margin certain products 

according to a prescribed portfolio 

margin methodology.6 The portfolio 

margin pilot program is substantially 

similar to margin rule amendments by 

the NYSE and the Chicago Board 

Options Exchange (‘‘CBOE’’), which 

were approved by the Commission.7

Consistent with the amended NYSE and 

CBOE portfolio margin programs, the 

pilot, as proposed in SR–NASD–2007–

013, started on April 2, 2007 and ended 

on July 31, 2007. The pilot program was 

extended for a one-year period to July 

31, 2008, also consistent with the NYSE 

and CBOE portfolio margin programs.8

Concurrently with this proposed rule 

change and consistent with the CBOE, 

FINRA proposes to make the portfolio 

margin pilot program contained in 

NASD Rule 2520(g) and Incorporated 

NYSE Rule 431(g) permanent.9

FINRA proposes to codify FINRA’s 

interpretation of NASD Rule 2520(g) 

and Incorporated NYSE Rule 431(g) 

regarding (1) monitoring concentrated 

equity positions and (2) timing of day 

trading margin calls. 

Concentrated Equity Positions 

NASD Rule 2520(g)(1) and 

Incorporated NYSE Rule 431(g)(1) 

outline various procedural guidelines 

that firms are required to meet in order 

to offer portfolio margin to customers. 

FINRA has issued guidance in the form 

of frequently asked questions regarding 

its expectation that, among other things, 

firms develop reports that identify a 

concentration of any individual security 

in both individual portfolio margin 

accounts and across all portfolio margin 

accounts.10 FINRA proposes to codify 

this requirement in NASD Rule 

2520(g)(1)(I) and Incorporated NYSE 

Rule 431(g)(1)(I) because FINRA 

believes it is an essential component in 

monitoring the risk to broker-dealers 

that offer portfolio margin to customers. 

FINRA expects that firms impose a 

higher maintenance margin requirement 

on any identified concentrated 

positions. 

Day Trading 

NASD Rule 2520(g)(13) and 

Incorporated NYSE Rule 431(g)(13) 

require firms to monitor accounts that 

do not maintain $5 million minimum 

equity to ensure that the day trading 

requirements pursuant to NASD Rule 

2520(f)(8)(B) and Incorporated NYSE 

Rule 431(f)(8)(B) are applied. Pursuant 


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46112 Federal Register / Vol. 73, No. 153 / Thursday, August 7, 2008 / Notices 

11 ‘‘Day-trading buying power’’ is defined in 

NASD Rule 2520(f)(8)(B)(iii) and Incorporated 

NYSE Rule 431(f)(8)(B)(iii) to mean the equity in 

the customer’s account at the close of business of 

the previous day, less any maintenance margin 

requirement as prescribed in the rule, multiplied by 

four for equity securities. 

12See NASD Rule 2520(f)(8)(C) and Incorporated 

NYSE Rule 431(f)(8)(C). 

13See NASD Rule 2520(g)(10)(A) and 

Incorporated NYSE Rule 431(g)(10)(A). 

14 15 U.S.C. 78o–3(b)(6). 

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

16 17 CFR 240.19b–4(f)(1). 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

to the day trading requirements, 

customers are permitted to engage in 

day trading provided they day trade 

within a specific dollar limit, referred to 

as the day trading buying power.11

Customers that day trade in excess of 

their day trading buying power are 

required to deposit additional funds 

and/or securities to meet a special 

maintenance margin deficiency, also 

referred to as a day trade margin call. In 

a strategy-based margin account, day 

trade margin calls are due within five 

business days.12 In a portfolio margin 

account, margin deficiencies are due 

within three business days.13 FINRA 

believes that day trade margin calls 

incurred in a portfolio margin account 

should also be met within three 

business days. The proposed rule 

change would amend NASD Rule 

2520(g)(13) and Incorporated NYSE 

Rule 431(g)(13) to explicitly provide 

that day trade margin deficiencies are 

due within three business days. 

FINRA has filed the proposed rule 

change for immediate effectiveness. The 

implementation date of the proposed 

rule change is August 1, 2008. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

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

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest. FINRA believes it is in 

the public interest to codify its stated 

interpretation with respect to 

monitoring concentrated equity 

positions and the timing of day trading 

margin calls in the rule text. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change constitutes a stated policy, 

practice or interpretation with respect to 

the meaning, administration, or 

enforcement of an existing rule, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 15 and paragraph 

(f)(1) of Rule 19b–4 thereunder.16

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

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

Number SR–FINRA–2008–042 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2008–042. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE, Washington, DC 

20549 on official business days between 

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

of such filing also will be available for 

inspection and copying at the principal 

office of FINRA. All comments received 

will be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–FINRA–

2008–042 and should be submitted on 

or before August 28, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–18238 Filed 8–6–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58267; File No. SR–ISE–

2008–59] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change To Amend Rule 2009 To Permit 

the Listing and Trading of Additional 

Index Options Series That Do Not Meet 

Current Rule 2009 Requirements, if 

Such Options Series Are Listed and 

Traded on at Least One Other National 

Securities Exchange 

July 30, 2008. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on July 30, 

2008, the International Securities 

Exchange, LLC (‘‘ISE’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by ISE. ISE filed the 

proposed rule change as a ‘‘noncontroversial’’ proposed rule change 

pursuant to Section 19(b)(3)(A) of the 


sroberts on PROD1PC70 with NOTICES