Document Headings

                    Document headings vary by document type but may contain                    the following:                  
                -                       the agency or agencies that issued and signed a document                    
                -                       the number of the CFR title and the number of each part                      the document amends, proposes to amend, or is directly                      related to                    
                -                       the agency docket number / agency internal file number                    
                -                       the RIN which identifies each regulatory action listed in                      the Unified Agenda of Federal Regulatory and Deregulatory                      Actions                    

                    See the                                          Document Drafting Handbook                                        for more details.                  

###### Securities and Exchange Commission

          - [Release No. 34-58461; File No. SR-FINRA-2008-033] 

## I. Introduction 

                    On June 23, 2008 the Financial Industry Regulatory Authority, Inc. (“FINRA”) (f/k/a National Association of Securities Dealers, Inc. (“NASD”)) filed with the Securities and Exchange Commission (“Commission” or “SEC”) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) [1]                                          and Rule 19b-4 thereunder,[2]                                          a proposed rule change to adopt the short interest reporting requirements (NASD Rule 3360 and Incorporated NYSE Rules 421(1) and 421.10) as FINRA Rule 4560 in the consolidated FINRA rulebook. On July 16, 2008, FINRA submitted Amendment No. 1 to the proposed rule change. The proposed rule change, as amended, was published for comment in the                     **Federal Register**                     on July 31, 2008.[3]                                          The Commission received no comment letters on the proposed rule change. This order approves the proposed rule change, as amended.                 

## II. Description of the Proposed Rule Change 

                    As part of the process of developing the new consolidated rulebook (“Consolidated FINRA Rulebook”),[4]       ( print page 52711)                        FINRA proposed to adopt the short interest reporting requirements in NASD Rule 3360 and Incorporated NYSE Rules 421(1) and 421.10 as FINRA Rule 4560 in the Consolidated FINRA Rulebook.                 

                    NASD Rule 3360 and Incorporated NYSE Rules 421(1) and 421.10 set forth FINRA's short interest reporting requirements.[5]                                          NASD Rule 3360 requires members to report short positions [6]                                          in OTC Equity Securities [7]                                          and exchange-listed securities not otherwise reported to another self-regulatory organization (“SRO”),[8]                                          and Incorporated NYSE Rules 421(1) and 421.10 require members to report short positions in NYSE-listed securities. Members must report total short positions in all customer and proprietary accounts as of the designated settlement dates and in the manner so prescribed.[9]                                          Currently, the rules require such information to be reported twice a month, which in turn, is then made publicly available on an aggregate basis twice a month.[10] 

                    As of June 30, 2008, FINRA consolidated the collection of short interest data, so that firms report short interest positions in all securities to FINRA using the Regulation Filing Applications system; consequently, firms will no longer be able to report any of their short interest positions using the NYSE's Electronic Filing Platform (“EFP”) or the Securities Industry Automation Corporation (“SIAC”).[11] 

Given that the short interest requirements in each of the rules are substantially similar, FINRA proposed to adopt these requirements as part of the Consolidated FINRA Rulebook, subject only to certain non-substantive changes. Most notably, because FINRA will now be the primary collector of consolidated short interest data for its members in all securities (rather than only if such positions in exchange-listed securities are not reported to another SRO), FINRA is not retaining the text in NASD Rule 3360 that limits short interest reportable to FINRA to those positions in exchange-listed securities “not otherwise reported to another self-regulatory organization.” 

## III. Discussion and Findings 

                    After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act, and the rules and regulations thereunder that are applicable to a national securities association.[12]                                          In particular, the Commission believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,[13]                                          which requires, among other things, that 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. The Commission notes that it has previously approved the short interest reporting requirements of NASD Rule 3360 [14]                                          and NYSE Rules 421(1) and 421.10 [15]                                         , and the proposed rule change moves these requirements to the Consolidated FINRA Rulebook, subject only to certain non-substantive changes. The short interest reporting requirements previously have been found to meet the statutory requirements, and the Commission believes such requirements have since proven effective in achieving the statutory mandates.                 

## IV. Conclusion 

*It is therefore ordered*                    , pursuant to Section 19(b)(2) of the Act,[16]                                          that the proposed rule change (SR-FINRA-2008-033), as modified by Amendment No. 1 thereto, be, and it hereby is, approved.                 

                        For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.[17] 

Florence E. Harmon, 

Acting Secretary.

# Footnotes

1.                             15 U.S.C. 78s(b)(1).                     
        Back to Citation      

2.                             17 CFR 240.19b-4.                     
        Back to Citation      

3.                             Securities Exchange Act Release No. 58227 (July 25, 2008), 43 FR 44793 (July 31, 2008).                     
        Back to Citation      

4.                             The current FINRA rulebook consists of two sets of rules: (1) NASD Rules and (2) rules incorporated from NYSE (“Incorporated NYSE Rules”) (together referred to as the “Transitional Rulebook”). The Incorporated NYSE Rules apply only to those members of FINRA that are also members of the NYSE (“Dual Members”). Dual Members also must comply with NASD Rules. For more information about the rulebook consolidation process, see FINRA Information Notice, March 12, 2008 (“Rulebook Consolidation Process”).                     
        Back to Citation      

5.                             Incorporated NYSE Rules 421(2) and 421.40 require members carrying margin accounts for customers to report certain aggregate debit and free credit balances.                     
        Back to Citation      

6.                             Short positions required to be reported under the rules are those resulting from “short sales” as the term is defined in Rule 200(a) of Regulation SHO, subject to certain limited exceptions.                         *See*                         NASD Rule 3360(b)(1).                     
        Back to Citation      

7.                             The term “OTC Equity Securities” refers to any equity security that is not listed on a national securities exchange.                         *See*                         NASD Rule 3360(b)(3).                     
        Back to Citation      

8.                             It is the responsibility of each member firm to ensure that it is reporting accurate short interest data, including confirming that issue symbols are active and valid as of the designated settlement date.                         *See Notice to Members*                         06-20 (April 2006).                     
        Back to Citation      

9.                             Non-self-clearing broker-dealers generally are considered to have satisfied their reporting requirement by making appropriate arrangements with their respective clearing organizations.                         *See Notice to Members*                         03-08 (February 2003).                     
        Back to Citation      

10.                             A schedule of FINRA's designated settlement dates can be found on its Web site at                         *http://www.finra.org. See also Notice to Members*                         07-24 (May 2007).                     
        Back to Citation      

11.                                                     *See Regulatory Notice*                         08-13 (March 2008). Prior to June 30, firms reported short interest positions in NYSE-listed securities through the EFP and all other securities through FINRA's Regulation Filing Applications (“RFA”) system or the SIAC.                     
        Back to Citation      

12.                             In approving this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation.                         *See*15 U.S.C. 78(c)(f).                    
        Back to Citation      

13.                             15 U.S.C. 78o-3(b)(6).                    
        Back to Citation      

14.                             Securities Exchange Act Release No. 56279 (Aug. 17, 2007), 72 FR 48713 (Aug. 24, 2007).                     
        Back to Citation      

15.                             Securities Exchange Act Release No. 57252 (Feb. 1, 2008), 73 FR 7343 (Feb. 7, 2008).                     
        Back to Citation      

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

17.                             17 CFR 200.30-3(a)(12).                    
        Back to Citation      

[FR Doc. E8-20964 Filed 9-9-08; 8:45 am] 

BILLING CODE 8010-01-P