54652 Federal Register / Vol. 73, No. 184 / Monday, September 22, 2008 / Notices 

25Pink OTC attached a study of its 2006 

Minimum Quote Increment Tier Pilot Program. 

(‘‘Pink OTC Pilot Program’’) According to Pink 

OTC, the study showed that minimum tier sizes 

implemented during the Pink OTC Pilot Program 

did not result in artificial widening of spreads or 

degradation of market quality. 

26See 15 U.S.C. 78o–3(b)(6). 

27 In approving this proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition, 

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

28See Release No. 34–55351, supra note 10. 

29See supra note 13. 

30 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 58103 

(July 3, 2008), 73 FR 40403. 

4See letter from Amal Aly, Managing Director 

and Associate General Counsel, Securities Industry 

and Financial Markets Association (‘‘SIFMA’’), to 

Florence E. Harmon, Acting Secretary, Commission, 

dated August 4, 2008 (‘‘SIFMA letter’’). 

priced customer limit orders are 

protected over superior priced limit 

orders, and that ‘‘adoption of SR– 

NASD–2007–041 without correction of 

this anomalous situation would disrupt 

the orderly functioning of the market for 

OTC Equity Securities.’’ 

The Pink OTC Letter also 

recommended more broadly that the 

minimum increments of IM–2110–2 be 

considered as part of an amendment 

that would mandate minimum quote 

increment tier sizes for OTC equity 

securities.25 The Pink OTC Letter urged 

that minimum increments for price 

improvement should mirror minimum 

quote increment tier sizes established 

on the Pink Quote interdealer quotation 

system to create ‘‘a level playing field 

for all market participants and improve 

investor confidence in the market.’’ 

III. Discussion and Commission’s 

Findings 

The Commission has reviewed 

carefully the proposed rule change, as 

modified by Amendment No. 2, and the 

two comment letters it received, and 

finds that the proposed rule change, as 

modified by Amendment No. 2, is 

consistent with the Act and the rules 

and regulations thereunder applicable to 

a national securities association, 

including the provisions of Section 

15A(b)(6) of the Act,26 which requires, 

among other things, that FINRA rules be 

designed to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with the persons 

engaged in regulating, clearing, settling, 

processing transactions in securities, 

and, in general, to protect investors and 

the public interest.27

The Commission previously approved 

revisions to IM–2110–2 to apply the 

Manning Rule to OTC equity 

securities,28 and notes that FINRA 

delayed its implementation pending 

Commission approval of the instant 

proposed rule change, as amended.29

FINRA’s proposal would revise the 

current price-improvement standards by 

adding a number of tiers to the 

minimum price-improvement standard 

for customer limit orders priced below 

$.01; adjusting the price-improvement 

standards to also include a measure 

based on one-half of the current inside 

spread for customer limit orders in OTC 

equity securities when such limit orders 

are priced greater than or equal to $1.00; 

and changing the price improvement 

standards for limit orders priced outside 

the inside market. The Commission 

believes that these revisions to IM– 

2110–2 are appropriate and reasonably 

designed to protect customer limit 

orders in both NMS stocks and OTC 

equity securities. 

Fidessa Corp. suggested that the 

minimum price-improvement standards 

should be based on the security’s trade 

price rather than the limit order price of 

the customer limit order. The 

commenter observed that anomalies can 

occur at the periphery of the minimum 

price improvement tiers for low-priced 

securities when the minimum priceimprovement requirement is based on 

the order’s price. 

In the FINRA Response Letter, FINRA 

responded that Fidessa Corp.’s proposed 

alternative approach would address 

some of the potential anomalies in the 

application of the proposed rule, but 

could have unintended consequences in 

its application and would require 

significant reprogramming by the firms 

to implement. Instead, FINRA revised 

its proposal, in Amendment No. 2, to 

require firms to institute written 

policies and procedures to fill those 

more aggressively priced customer limit 

orders ahead of other less aggressively 

priced limit orders covered by the Rule. 

This approach was supported by Pink 

OTC. 

The Commission believes that the 

revisions in Amendment No. 2 are 

reasonably designed to eliminate the 

anomalies that can occur in the case of 

limit orders with prices that straddle the 

proposed minimum price-improvement 

tiers. Although Pink OTC urged that 

amendments to IM–2110–2 should be 

complemented by additional provisions 

mandating minimum quote increment 

tier sizes for OTC equity securities, the 

Commission considers this 

recommendation to be beyond the scope 

of the proposed rule change before it. 

Accordingly, the Commission believes 

that the proposed rule change strikes a 

reasonable balance between protecting 

customer limit orders and enhancing the 

opportunity for investors to receive 

superior-priced limit order executions 

in OTC equity securities. 

For the reasons described above, the 

Commission believes that the proposed 

rule change is consistent with the Act. 

IV. Conclusion 

It is therefore ordered, pursuant to 

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

proposed rule change (SR–NASD–2007– 

041), as modified by Amendment No. 2, 

be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.30

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–22011 Filed 9–19–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58533; File No. SR–FINRA– 

2008–036] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change Relating to 

Incorporated NYSE Rules 

September 12, 2008 

I. Introduction 

On July 3, 2008, 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 proposed rule 

change to amend certain rules of the 

New York Stock Exchange LLC 

(‘‘NYSE’’) that relate to member firm 

conduct, and that have been 

incorporated into the FINRA rulebook 

(‘‘Incorporated NYSE Rules’’). The 

proposed rule change was published for 

comment in the Federal Register on July 

14, 2008.3 The Commission received 

one comment letter regarding the 

proposal.4 This order approves the 

proposed rule change. 

II. Description of the Proposed Rule 

Change 

Currently, the FINRA rulebook 

consists of rules of the National 

Association of Securities Dealers, Inc. 

(‘‘NASD Rules’’), and the Incorporated 

NYSE Rules. The Incorporated NYSE 

Rules apply only to firms that are 

members of FINRA and the NYSE 

(‘‘Dual Members’’). FINRA is currently 

developing a consolidated rulebook 

which will consist only of FINRA rules. 

In the interim period, FINRA proposes 


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Federal Register / Vol. 73, No. 184 / Monday, September 22, 2008 / Notices 54653 

5Where the use of the term ‘‘allied member’’ in 

the Incorporated NYSE Rules denotes an 

individual’s status as a ‘‘control person’’ of a 

member organization, FINRA proposes to substitute 

‘‘allied member’’ with the newly-created category of 

‘‘principal executive.’’ 

6Supra note 4. 

7 Id. at 1. 

8 Id. at 2. 

9 Id. 

10 Id. 

11 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

12 15 U.S.C. 78o–3(b)(6). 

13See SR–NYSE–2008–80 (filed September 5, 

2008). 

14 Id. 

15 17 CFR 200.30–3(a)(12). 

several amendments to the Incorporated 

NYSE Rules. 

In some instances, FINRA proposes to 

harmonize inconsistencies between the 

Incorporated NYSE Rules and the NASD 

Rules. For example, FINRA proposes to 

delete the term ‘‘allied member’’ from 

the Incorporated NYSE Rules, as that 

concept has no direct FINRA analogue.5

Similarly, FINRA proposes to reposition the Incorporated NYSE Rules 

governing the closing-out of securities 

contracts (‘‘Buy-In Rules’’), combining 

NYSE Rules 283, 285, 286, 287, 288, 

289, and 290 in NYSE Rule 282. This 

proposed change would consolidate the 

NYSE Buy-In Rules into one rule, and 

would make NYSE Rule 282 more 

similar in format to the corresponding 

NASD rule. 

In other instances, FINRA proposes to 

rescind provisions of the Incorporated 

NYSE Rules that are substantively 

addressed by NASD Rules. For example, 

FINRA proposes to rescind NYSE Rule 

404, which regulates the carrying of 

accounts for customers by members, as 

that rule is duplicative of the FINRA 

Letter of Approval. Similarly, FINRA 

proposes to rescind NYSE Rule 446, 

which relates to business continuity and 

contingency plans, as that rule is nearly 

identical to NASD Rules 3510 and 3520. 

FINRA also proposes to delete certain 

NYSE Rules that are outdated, and that 

have no equivalent NASD rules. For 

example, FINRA proposes to rescind 

NYSE Rule 311(h), which prescribes the 

number of partners a member 

organization must have in order for that 

member to conduct business. There is 

no comparable NASD rule, and, 

according to FINRA, this rule no longer 

applies to members’ current business 

models. 

III. Summary of Comments 

The Commission received one 

comment letter in response to the 

proposed rule change.6 That commenter 

supported the proposed rule change, 

and urged that the Commission approve 

it as expeditiously as possible.7

However, that commenter also 

requested that the Commission, upon 

approving the proposed rule change, 

take steps to ensure that NYSE adopts 

conforming changes to its rulebook.8

According to the commenter, until the 

NYSE rulebook is conformed to the 

Incorporated NYSE Rules, Dual 

Members will be subject to the 

Incorporated NYSE Rules, the legacy 

NASD rules that currently form part of 

the FINRA rulebook, and the NYSE 

rules.9 The commenter stated that this 

would be ‘‘entirely inconsistent with 

one of the key benefits in the creation 

of FINRA.’’ 10

IV. Discussion and Commission 

Findings 

The Commission has reviewed the 

proposed rule change 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 11 and, in particular, Section 

15A(b)(6) of the Act,12 which requires 

that FINRA have rules 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’s proposal provides greater 

harmonization between the 

Incorporated NYSE Rules and the NASD 

Rules. The amendments to the 

Incorporated NYSE Rules will reduce 

regulatory disparities, and will lessen 

the regulatory burden on Dual Members. 

Additionally, the concern articulated by 

the commenter has been effectively 

addressed by a recent NYSE filing.13 In 

SR–NYSE–2008–80, NYSE proposes to 

amend its rulebook to conform its rules 

to the Incorporated NYSE Rules.14

It is therefore ordered, pursuant to 

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

proposed rule change (SR–FINRA– 

2008–036) be, and it hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–22012 Filed 9–19–08; 8:45 am] 

BILLING CODE 8010–01–P 

SMALL BUSINESS ADMINISTRATION 

[Disaster Declaration #11418 and #11419] 

Louisiana Disaster Number LA–00019 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Amendment 3. 

SUMMARY: This is an amendment of the 

Presidential declaration of a major 

disaster for the State of Louisiana 

(FEMA–1786–DR), dated 09/02/2008. 

Incident: Hurricane Gustav. 

Incident Period: 09/01/2008 and 

continuing. 

Effective Date: 09/11/2008. 

Physical Loan Application Deadline 

Date: 11/03/2008. 

EIDL Loan Application Deadline Date: 

06/02/2009. 

ADDRESSES: Submit completed loan 

applications to: U.S. Small Business 

Administration, Processing and 

Disbursement Center, 14925 Kingsport 

Road, Fort Worth, TX 76155. 

FOR FURTHER INFORMATION CONTACT: A. 

Escobar, Office of Disaster Assistance, 

U.S. Small Business Administration, 

409 3rd Street, SW., Suite 6050, 

Washington, DC 20416. 

SUPPLEMENTARY INFORMATION: The notice 

of the Presidential disaster declaration 

for the State of Louisiana, dated 09/02/ 

2008 is hereby amended to include the 

following areas as adversely affected by 

the disaster: 

Primary Parishes: (Physical Damage and 

Economic Injury Loans): Calcasieu. 

All other parishes contiguous to the 

above named primary parish have 

previously been declared. 

All other information in the original 

declaration remains unchanged. 

(Catalog of Federal Domestic Assistance 

Numbers 59002 and 59008) 

Herbert L. Mitchell, 

Associate Administrator for Disaster 

Assistance. 

[FR Doc. E8–22023 Filed 9–19–08; 8:45 am] 

BILLING CODE 8025–01–P 

SMALL BUSINESS ADMINISTRATION 

Disaster Declaration #11418 and 

#11419 

Louisiana Disaster Number LA–00019 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Amendment 4. 

SUMMARY: This is an amendment of the 

Presidential declaration of a major 

disaster for the State of Louisiana 

(FEMA–1786–DR), dated 09/02/2008. 


sroberts on PROD1PC70 with NOTICES