Federal Register / Vol. 73, No. 182 / Thursday, September 18, 2008 / Notices 54193 

25 In approving this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

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

26 15 U.S.C. 78o–3(b)(6). 

27See, e.g., Securities Exchange Act Release No. 

48989 (December 23, 2003), 68 FR 75684 (December 

31, 2003). 

28 15 U.S.C. 78s(b)(2). 

29 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

in the first syndicate covering 

transaction, as well as other pertinent 

information, such as identification of 

the security, its symbol, and the date 

such activity will occur. In addition, 

members would be required to 

subsequently confirm such activity 

within one business day of completion, 

including identification of the security 

and its symbol, the total number of 

shares and the date(s) of such activity. 

The proposed provision is substantially 

similar to NASD Rule 6540(d)(1)(D)(iii). 

FINRA believes that by including these 

notice requirements in proposed Rule 

5190, the proposed rule change would 

clarify that they apply to distributions of 

all OTC Equity Securities and are not 

limited to distributions of OTCBBeligible securities. 

In light of the foregoing, FINRA 

proposed to delete paragraphs (b)(10) 

and (11) from NASD Rule 2710 and 

Incorporated NYSE Rule 392 in its 

entirety. FINRA represented that the 

notice requirements of NASD Rule 

2710(b)(10) and (11) and Incorporated 

NYSE Rule 392(a) largely would be 

incorporated in proposed Rule 5190. 

Because Incorporated NYSE Rule 392(b) 

is specific to the NYSE marketplace, 

FINRA did not propose that these 

requirements become part of the 

Consolidated FINRA Rulebook. 

3. Proposed Amendments to 

Marketplace Rules 

FINRA also proposed to clarify the 

scope and application of the Regulation 

M-related requirements that are in the 

current OTCBB and ADF marketplace 

rules. FINRA proposed to adopt new 

FINRA Rule 6470 (Withdrawal of 

Quotations in an OTC Equity Security in 

Compliance with SEC Regulation M), 

which would: (1) require a member that 

is a distribution participant, affiliated 

purchaser, selling security holder or 

issuer in a distribution of an OTC Equity 

Security that is a covered security 

subject to Rule 101 or Rule 102 of 

Regulation M to withdraw all quotations 

in the security during the restricted 

period; and (2) prohibit the entry of 

stabilizing bids for the OTC Equity 

Security pursuant to Rule 104 of 

Regulation M. FINRA represented that 

proposed Rule 6470 is substantially 

similar to NASD Rule 6540(d)(1)(D)(ii) 

and would clarify that the requirements 

apply not only to OTCBB-eligible 

securities, but to all OTC Equity 

Securities quoted in any inter-dealer 

quotation system (i.e., OTCBB and Pink 

Sheets). Thus, under the proposed rule 

change, the Regulation M-related 

provisions would be deleted from the 

OTCBB rules (specifically, paragraphs 

(d)(1)(D), (E) and (F) would be deleted 

from NASD Rule 6540) and comparable 

requirements would be housed in either 

proposed Rule 5190, as discussed above, 

or proposed Rule 6470. 

FINRA also proposed to make certain 

conforming changes to the Regulation 

M-related rules applicable to the ADF. 

Specifically, FINRA proposed to amend 

NASD Rule 4619A(f) to conform to the 

language and structure of proposed Rule 

6470. Thus, a Registered Reporting ADF 

Market Maker that is a distribution 

participant, affiliated purchaser, selling 

security holder or issuer in a 

distribution of an NMS stock that is a 

covered security subject to Rule 101 or 

102 of Regulation M would be required 

to request an excused withdrawal of its 

quotations in the ADF in the offered 

security. FINRA believes that it is more 

appropriate to impose such obligation 

on the member that is posting the 

quotation, rather than require the 

manager of the distribution to do so on 

behalf of each member. FINRA further 

proposed to amend NASD Rule 4200A, 

which sets forth the definitions 

applicable to the ADF rules, to make 

technical and conforming changes such 

as adding necessary references to 

Regulation M and deleting definitions 

that are currently not used in the ADF 

rules. 

FINRA believes that the proposed rule 

change will significantly improve the 

clarity of the current rules and enhance 

the information FINRA receives, which 

will better enable FINRA to monitor 

member OTC quoting and trading for 

purposes of Regulation M compliance. 

FINRA will announce the 

implementation date of the proposed 

rule change in a Regulatory Notice to be 

published no later than 60 days 

following Commission approval. 

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.25 In 

particular, the Commission believes that 

the proposed rule change is consistent 

with the provisions of Section 15A(b)(6) 

of the Act,26 which requires, among 

other things, that FINRA 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. The 

Commission believes that moving the 

Regulation M-related provisions of the 

rules under FINRA’s jurisdiction in the 

manner proposed will provide greater 

clarity to members and aid in 

compliance. The Commission also notes 

that it has previously approved the 

portions of NASD Rule 2710 to be 

adopted as FINRA Rule 5110,27 and the 

proposal merely moves that portion of 

Rule 2710 nearly verbatim from the 

NASD rulebook to the Consolidated 

FINRA Rulebook. The Commission 

believes that this move is primarily 

ministerial and only aids FINRA 

members in complying with existing 

obligations. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,28 that the 

proposed rule change (File No. SR– 

FINRA–2008–039) be, and hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.29

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–21760 Filed 9–17–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58520; File No. SR–FINRA– 

2008–040] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change To Eliminate 

the Requirement To Report Yield to 

TRACE and for FINRA To Calculate 

and Disseminate a Standard Yield 

September 11, 2008. 

I. Introduction 

On July 17, 2008, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

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

Securities Exchange Act of 1934 

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

proposal to eliminate the requirement 

for members to report yield to the Trade 

Reporting and Compliance Engine 

(‘‘TRACE’’) in connection with a 

transaction in a TRACE-eligible 

security, and instead for TRACE to 

calculate and disseminate a ‘‘standard 


dwashington3 on PRODPC61 with NOTICES
54194 Federal Register / Vol. 73, No. 182 / Thursday, September 18, 2008 / Notices 

3Securities Exchange Act Release No. 58283 

(August 1, 2008), 73 FR 46108 (August 7, 2008) 

(SR–FINRA–2008–040). 

4The member is not required to report yield if the 

TRACE-eligible security is in default; the interest 

rate on the security floats; the interest rate will or 

may be ‘‘stepped-up’’ or ‘‘stepped-down’’, and the 

amount of increase or decrease is an unknown 

variable; the security is a pay-in-kind (‘‘PIK’’) 

security; the principal or interest to be paid is an 

unknown variable or is an amount that is not 

currently ascertainable; or if FINRA determines that 

reporting yield would provide inaccurate or 

misleading information concerning the price of, or 

trading in, the security. See NASD Rule 6230(c)(13). 

5FINRA stated that the standard yield in TRACE: 

(1) Is calculated as the internal rate of return 

according to a discounted cash flow model; (2) is 

calculated, in a principal trade, on the reported 

price, which includes the mark-up/mark-down, and 

in an agency trade, on the reported price and 

reported commission; (3) does not include any fees 

or charges that are not included, in a principal 

trade, as part of the reported price, and in an agency 

trade, in the reported commission; (4) is calculated 

as the lower of yield to call (if the bond is callable) 

and yield to maturity, or so-called ‘‘yield-to-worst;’’ 

and (5) is calculated utilizing a methodology that 

is widely used by professionals in the securities 

industry. 

6Standard yield is included in the disseminated 

TRACE data when the member is required to report 

yield but fails to do so. 

7TRACE would not disseminate a standard yield 

for any transaction where a member currently is not 

required to report yield under NASD Rule 

6230(c)(13). See supra note 4. 

8 17 CFR 240.10b–10. 

9 In approving this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

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

10 15 U.S.C. 78o–3(b)(6). 

11 15 U.S.C. 78s(b)(2). 

12 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

yield.’’ The proposal was published for 

comment in the Federal Register on 

August 7, 2008.3 The Commission 

received no comments on the proposal. 

This order approves the proposed rule 

change. 

II. Background 

NASD Rule 6230(c) currently requires 

a member, in connection with a 

transaction in a TRACE-eligible 

security, to report various pieces of 

information to TRACE, including, for 

most transactions, the lower of yield to 

call or yield to maturity.4 Upon receipt 

of that trade report, TRACE 

disseminates certain information about 

the transaction (except if it is a Rule 

144A transaction), including the yield 

as reported by the member. TRACE 

calculates the standard yield 5 but 

generally does not disseminate it.6

FINRA has proposed (1) to eliminate 

the requirement for members to report 

yield; and (2) to disseminate the 

standard yield in most cases.7 FINRA 

stated that there currently is no 

uniformity in the manner by which 

members calculate yield, and that 

disseminating standard yield— 

calculated according to a single formula 

and with a uniform set of assumptions— 

will provide more useful information to 

market participants. Moreover, FINRA 

believes that it may be useful for 

customers to compare the standard yield 

in a transaction as reported by TRACE 

against the member-calculated yield that 

the member provides on the customer 

confirmation required by Rule 10b-10 

under the Act.8

Vendors. FINRA also has proposed to 

require that data vendors and 

redistributors that provide TRACE 

information display the yield. However, 

certain vendors desire to disseminate a 

yield calculated by the vendor, rather 

than the standard yield. FINRA would 

permit this flexibility, provided that a 

vendor displaying a yield other than the 

standard yield disclose that fact. 

Effective Date. FINRA will announce 

the effective date of the proposed rule 

change in a Regulatory Notice to be 

published no later than 60 days 

following Commission approval. The 

effective date would be no later than 90 

days following publication of that 

Regulatory Notice. 

III. Discussion and Findings 

After careful consideration, the 

Commission 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.9 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with section 15A(b)(6) of the Act,10

which requires, among other things, that 

FINRA 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. 

The Commission believes that the 

proposal will likely improve 

transparency in the corporate debt 

markets by making available a standard 

yield for most transactions that is 

calculated using an industry-recognized 

formula with a uniform set of 

assumptions. At the same time, the 

proposal reduces regulatory burdens by 

relieving FINRA members of the 

obligation to calculate and report yield 

for each transaction in a TRACE-eligible 

security. 

IV. Conclusion 

It is therefore ordered, pursuant to 

section 19(b)(2) of the Act,11 that the 

proposed rule change (File No. SR– 

FINRA–2008–040) be, and hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant delegated 

authority.12

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–21762 Filed 9–17–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58502; File No. SR– 

NYSEArca–2008–93] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and Order 

Granting Accelerated Approval of 

Proposed Rule Change Relating to the 

Listing of the iShares Lehman Agency 

Bond Fund 

September 10, 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 August 

25, 2008, NYSE Arca, Inc. (‘‘Exchange’’ 

or ‘‘NYSE Arca’’) 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 the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons and approves 

the proposed rule change on an 

accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange, through its whollyowned subsidiary NYSE Arca Equities, 

Inc. (‘‘NYSE Arca Equities’’), proposes 

to list and trade shares (‘‘Shares’’) of the 

following fund of iShares Lehman 

Agency Bond Fund. The text of the 

proposed rule change is available on the 

Exchange’s Web site at http:// 

www.nyse.com, at the Exchange’s 

principal office and at the Commission’s 

Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 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 


dwashington3 on PRODPC61 with NOTICES