7018 Federal Register / Vol. 73, No. 25 / Wednesday, February 6, 2008 / Notices 

12See Letter from MaryAnn Lamendola, Chief 

Compliance Officer, Chase Investment Services 

Corporation (Jan. 24, 2008) (‘‘Chase Letter’’); ACLI 

Letter; Comm. of Annuity Insurers Letter; Dechert 

Letter; NAVA Letter; SIFMA Letter. One of these 

commenters believes that both the broker-dealer 

and the issuing insurance company should be 

allowed to negotiate checks upon receipt. See 

Dechert Letter. This commenter noted that 

customers may send back an application and one 

check to cover a variable annuity and other 

investment options, including mutual funds. Id. In 

this situation, the commenter stated there is a 

conflict between NASD Rule 2830(m), which 

requires the prompt purchase of mutual fund 

shares, and Rule 2821(c), which requires the brokerdealer to hold the customer’s check pending 

principal review. Id. 

13See ACLI Letter; Comm. of Annuity Insurers 

Letter; Dechert Letter. One commenter noted this 

could be accomplished by the broker-dealer 

developing controls to ensure that a variable 

annuity is not issued until after the completion of 

principal review. Chase Letter. 

14 Id. 

15See Letter from Barbara Gill, Deputy Director of 

Regulatory Affairs, Stifel, Nicolaus & Company, Inc. 

(Jan. 22, 2008) (‘‘Stifel Letter’’); Comm. of Annuity 

Insurers Letter; Dechert Letter; FSI Letter; ICI Letter; 

NAVA Letter; SIFMA Letter; Schwab Letter. 

16See NASD Rule 2821(c). 

17See, e.g., Comm. of Annuity Insurers Letter; 

Dechert Letter; SIFMA Letter; Stifel Letter. 

18 Id. 

19See, e.g., ACLI Letter; ICI Letter; T. Rowe Price 

Letter. 

20See Comm. of Annuity Insurers Letter; Dechert 

Letter; FSI Letter; NAVA Letter; Schwab Letter. 

Three commenters also specified that the seven 

days should not begin to run until a complete 

application is specifically received by the brokerdealer’s Office of Supervisory Jurisdiction. See 

Comm. of Annuity Insurers Letter; Dechert Letter; 

SIFMA Letter. 

21See ACLI Letter; Dechert Letter. 

22 Id. 

23See Dechert Letter. 

24 Id. 

25 15 U.S.C. 78o–3(b)(6). 

26 15 U.S.C. 78s(b)(2). 

27 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)(iii). 

4 4 17 CFR 240.19b–4(f)(6). 

5FINRA has asked the Commission to waive the 

30-day operative delay provided in Rule 19b–

4(f)(6)(iii). 17 CFR 240.19b–4(f)(6)(iii). 

review.12 Commenters stated customer 

funds could be held in these accounts 

and would not result in the issuance of 

a contract until principal review has 

been completed.13 Some commenters 

also stated that customer funds could be 

refunded in the event a contract is not 

issued.14

Eight commenters suggested that 

FINRA revise the timing of principal 

review requirement.15 Paragraph (c) 

requires a registered principal to review 

a transaction and determine whether he 

or she approves of it prior to 

transmitting the customer’s application 

to the issuing insurance company for 

processing, but no later than seven 

business days after the customer signs 

the application.16 Commenters stated 

that beginning the seven business day 

review period from the time when the 

customer signs the application is 

problematic because often the customer 

signs and mails the application, leaving 

the broker-dealer no control over the 

timing.17 Commenters also stated that 

they have no control over which means 

a customer uses to mail an application 

and how long it takes for that 

application to arrive at the brokerdealer.18 Some commenters suggested 

that the principal review process be 

required to be completed seven business 

days after the broker-dealer has received 

an application ‘‘in good order.’’ 19 Other 

commenters suggested that the sevenday period should begin when the 

broker-dealer receives the application 

and the broker-dealer reasonably deems 

the application is complete.20

Two commenters requested that 

FINRA propose a single implementation 

date for the entire rule.21 These 

commenters stated that establishing two 

different compliance dates would create 

confusion when implementing the 

proposed rule as well unnecessary and 

redundant system design costs.22

Paragraph (d) requires members to 

establish supervisory procedures 

reasonably designed to achieve 

compliance with the rule and paragraph 

(e) require members to develop training 

policies and programs to ensure 

compliance with the rule. One of these 

commenters believed imposing two 

separate compliance dates would 

require broker-dealers to provide 

duplicate sets of supervisory procedures 

to account for what the rule requires on 

May 5, 2008 and for what it requires on 

August 4, 2008.23 It also stated brokerdealers would have to implement one 

training program for the part of rule 

becoming effective on May 5, 2008 and 

another training program for principal 

review starting on August 4, 2008.24

IV. Discussion and Commission 

Findings 

The Commission has reviewed 

carefully the proposed rule change and 

the comments, and finds that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to a national securities 

association. In particular, the 

Commission finds that the proposed 

rule change is consistent with section 

15A(b)(6) of the Act, which requires, 

among other things, that the rules of a 

national securities association 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.25

The proposed rule change does not 

change any of the substantive provisions 

of Rule 2821. It allows broker-dealers 

additional time to comply with one 

portion of the rule and provides FINRA 

with additional time to further consider 

its members’ concerns. It is consistent 

with the requirements of the Act for 

FINRA to further consider paragraph (c) 

of Rule 2821 and its related Regulatory 

Notice to determine whether any 

unintended or harmful consequences 

might ensue upon the current effective 

date. 

V. Conclusion 

It is therefore ordered, pursuant to 

section 19(b)(2) of the Act,26 that the 

proposed rule change (SR–FINRA 2007–

040) be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E8–2074 Filed 2–5–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–57247; File No. SR–FINRA–

2008–002] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change to Reflect That the NASD/ 

NYSE Trade Reporting Facility Does 

Not Support the Three-Party Trade 

Report Functionality 

January 31, 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 January 

28, 2008, the Financial Industry 

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

(f/k/a the National Association of 

Securities Dealers, Inc. (‘‘NASD’’)) 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 substantially by FINRA. 

FINRA has filed this proposal pursuant 

to section 19(b)(3)(A)(iii) of the Act 3

and Rule 19b–4(f)(6) thereunder,4 which 

renders the proposal effective upon 

filing with the Commission.5 The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 


pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 73, No. 25 / Wednesday, February 6, 2008 / Notices 7019 

6Effective July 30, 2007, FINRA was formed 

through the consolidation of NASD and the member 

regulatory functions of NYSE Regulation. 

Accordingly, the NASD/NYSE TRF is now doing 

business as the FINRA/NYSE TRF. In addition to 

the NASD/NYSE TRF, there are two other TRFs in 

operation: The NASD/Nasdaq Trade Reporting 

Facility (the ‘‘NASD/Nasdaq TRF’’) and the NASD/ 

NSX Trade Reporting Facility (the ‘‘NASD/NSX 

TRF’’). The formal name change of each TRF is 

pending and, once completed, FINRA will file a 

separate proposed rule change to reflect those 

changes in the Manual. 

7 17 CFR 242.600(b)(47). 

8See NASD Rules 4632E(c) and 4632E(d), 

respectively. Current NASD Rules 4632E(c) and (d) 

are substantially similar to the reporting 

requirements relating to two- and three-party trade 

reports for FINRA’s Alternative Display Facility (the 

‘‘ADF’’). See NASD Rules 4632A(c) and (d). 

9The NASD/NYSE TRF may implement this 

functionality at a later date, in which case FINRA 

would submit a proposed rule change to amend its 

rules accordingly. 

10Neither the NASD/Nasdaq TRF nor the NASD/ 

NSX TRF supports three-party trade reports. 

Accordingly, members may submit trades to a TRF 

only in the two-party trade report format. Members 

may submit trades in the three-party trade report 

format to the ADF. 

11 15 U.S.C. 78o–3(b)(6). 

12 17 CFR 240.19b–4(f)(6)(iii). 

13 15 U.S.C. 78s(b)(3)(A). 

14 17 CFR 240.19b–4(f)(6). 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA proposes to amend the rules 

governing the NASD/NYSE Trade 

Reporting Facility (‘‘NASD/NYSE TRF’’) 

to delete NASD Rule 4632E(d), relating 

to three-party trade reports, because the 

NASD/NYSE TRF currently does not 

support the three-party trade report 

functionality. In addition, FINRA 

proposes to modify NASD Rule 

4632E(c), relating to two-party trade 

reports, to conform NASD Rule 4632E(c) 

to the two-party trade report rules of 

FINRA’s other Trade Reporting 

Facilities (‘‘TRFs’’).6

The text of the proposed rule change 

is available at http://www.finra.org, the 

principal office 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 

The TRFs, including the NASD/NYSE 

TRF, provide FINRA members with 

mechanisms for reporting trades in NMS 

stocks, as defined in Rule 600(b)(47) of 

Regulation NMS under the Act,7

executed otherwise than on an 

exchange. When the NASD/NYSE TRF 

was established, it was contemplated 

that members would be able to report 

trades to the NASD/NYSE TRF using 

either two- or three-party trade reports.8

A three-party trade report is a single 

trade report that denotes one Reporting 

Member (i.e., the member with the 

obligation to report the trade under 

FINRA’s rules) and two contra parties. 

However, the NASD/NYSE TRF has 

not implemented the three-party trade 

report functionality and members 

currently are able to submit reports to 

the NASD/NYSE TRF only in the twoparty trade report format.9 Accordingly, 

for its rules to accurately reflect the 

functionality of the NASD/NYSE TRF, 

FINRA proposes to delete NASD Rule 

4632E(d) relating to three-party trade 

reports. In addition, FINRA proposes to 

replace the two-party trade report 

provisions currently found in paragraph 

(c) of NASD Rule 4632E with a new 

paragraph (c), which is identical to the 

two-party trade report provisions of the 

NASD/Nasdaq TRF and the NASD/NSX 

TRF. According to FINRA, this will 

conform, to the extent practicable, the 

rules relating to the three TRFs.10

Finally, FINRA proposes technical 

changes to paragraphs (c), (d), and (h) of 

NASD Rule 6130E to reflect the deletion 

of NASD Rule 4632E(d) and the 

resulting renumbering of paragraphs in 

NASD Rule 4632E. 

FINRA has asked the Commission to 

waive the 30-day operative delay and to 

make the proposed rule change 

operative on the date of filing. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of section 15A(b)(6) of the Act,11 which 

requires, among other things, that 

FINRA’s rules be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, and, in general, to 

protect investors and the public interest. 

FINRA believes that by deleting rules 

that apply to a functionality that is not 

currently supported by the NASD/NYSE 

TRF, the proposed rule change will 

prevent member confusion and trade 

reporting errors. 

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 

FINRA has designated the proposed 

rule change as one that: (i) Does not 

significantly affect the protection of 

investors or the public interest; (ii) does 

not impose any significant burden on 

competition; and (iii) does not become 

operative for 30 days from the date of 

filing, or such shorter time as the 

Commission may designate if consistent 

with the protection of investors and the 

public interest. In addition, as required 

under Rule 19b–4(f)(6)(iii),12 FINRA 

provided the Commission with written 

notice of its intention to file the 

proposed rule change, along with a brief 

description and the text of the proposed 

rule change, at least five business days 

prior to filing the proposal with the 

Commission. Therefore, the foregoing 

rule change has become effective 

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

Act 13 and Rule 19b–4(f)(6) 

thereunder.14

Pursuant to Rule 19b–4(f)(6)(iii) under 

the Act, a proposal does not become 

operative for 30 days after the date of its 

filing, or such shorter time as the 

Commission may designate if consistent 

with the protection of investors and the 

public interest. FINRA has asked the 

Commission to waive the 30-day 

operative delay to expedite the deletion 

of rules relating to the three-party trade 

report functionality, which currently is 

not supported by the NASD/NYSE TRF, 

and the adoption of conforming changes 

to the NASD/NYSE TRF’s two-party 

trade report provisions. FINRA believes 

that these changes will prevent potential 

member confusion and trade reporting 

errors. FINRA notes, in addition, that 

the proposal amends the NASD/NYSE 

TRF’s trade reporting rules to accurately 

reflect the current functionality of the 

NASD/NYSE TRF, but does not affect 

members’ reporting obligations or 

current capability. 


pwalker on PROD1PC71 with NOTICES
7020 Federal Register / Vol. 73, No. 25 / Wednesday, February 6, 2008 / Notices 

15For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposal’s impact on efficiency, competition, and 

capital formation. See 15 U.S.C. 78c(f). 

16See NASD Rules 4632(c) and 4632C(c). 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 In Amendment No. 1, the Exchange made 

clarifying changes to the purpose section of the 

filing. 

4 15 U.S.C. 78s(b)(3)(A)(ii). 

5 17 CFR 240.19b–4(f)(2). 

The Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest 

because the deletion of the three-party 

trade report provisions is designed to 

ensure that the rules governing the 

NASD/NYSE TRF accurately reflect the 

operation of the NASD/NYSE TRF, 

which currently does not support the 

three-party trade report functionality.15

Similarly, the proposed changes to 

conform the NASD/NYSE TRF’s twoparty trade report rules to the two-party 

trade report rules of the NASD/Nasdaq 

TRF and the NASD/NSX TRF 16 will 

provide consistency among the rules of 

the TRFs and does not raise new 

regulatory issues. Accordingly, the 

Commission waives the 30-day 

operative delay and designates the 

proposal to be operative upon filing 

with the Commission. 

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–2008–002 on the 

subject line. 

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 

No. SR–FINRA–2008–002. 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 the 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 No. 

SR–FINRA–2008–002 and should be 

submitted on or before February 27, 

2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E8–2134 Filed 2–5–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–57237; File No. SR–ISE–

2007–124] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change and Amendment No. 1 Thereto 

Relating to Equity Fees 

January 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 December 

31, 2007, 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, II, and III below, which Items 

have been substantially prepared by ISE. 

On January 28, 2007, ISE submitted 

Amendment No. 1 to the proposed rule 

change.3 ISE filed the proposal pursuant 

to section 19(b)(3)(A)(ii) of the Act 4 and 

Rule 19b–4(f)(2) 5 thereunder, as 

establishing or changing a due, fee, or 

other charges applicable to a member, 

which renders the proposed rule change 

effective upon filing with the 

Commission. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change, 

as amended, from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

ISE is proposing to amend its 

Schedule of Fees with respect to equity 

transactions. The text of the proposed 

rule change is available at ISE, http:// 

www.ise.com, 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, the 

Exchange 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 

Exchange 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 

The Exchange proposes to amend its 

Schedule of Fees to: (1) Distinguish 

between transaction fees related to 

equity orders and equity orders 

submitted on an order delivery basis; (2) 

to increase the rebate for equity orders 

that add liquidity for securities that 

trade at or above $1.00 from $0.0025 to 

$0.0032; (3) to increase the rebate for 

equity orders submitted on an order 

delivery basis that add liquidity for 

securities that trade at or above $1.00 

from $0.0025 to $0.0027 (these orders 

are submitted by Order Delivery Equity 

Electronic Access Members (‘‘Order 

Delivery Equity EAMs’’)); and (4) to 

cease sharing market data revenues 

except with respect to orders submitted 

on an order delivery basis. The 


pwalker on PROD1PC71 with NOTICES