Document ID: SEC-2007-0472-0001
Agency: sec
Document Type: Proposed Rule
Title: Amendments to Regulation SHO
Posted Date: 2007-03-30T04:00Z

[Federal Register: March 30, 2007 (Volume 72, Number 61)]
[Proposed Rules]               
[Page 15079-15080]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30mr07-23]                         

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 242

[Release No. 34-55520; File No. S7-12-06]
RIN 3235-AJ57

 
Amendments to Regulation SHO

AGENCY: Securities and Exchange Commission.

ACTION: Notice of re-opening of comment period.

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SUMMARY: The Securities and Exchange Commission is re-opening the 
comment period on the ``Amendments to Regulation SHO'' it proposed in 
Securities Exchange Act Release No. 54154 (July 14, 2006), 71 FR 41710 
(July 21, 2006) (the ``Proposal''). In view of the continuing public 
interest in the Proposal, as well as to reflect concerns raised by 
commenters, we believe that it is appropriate to re-open the comment 
period before we take action on the Proposal.

DATES: Comments should be received on or before April 30, 2007.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number S7-12-06 on the subject line; or
     Use the Federal eRulemaking Portal (http://www.regulations.gov
). Follow the instructions for submitting comments.

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 Number S7-12-06. This file number 
should be included on the subject line if e-mail is used. To help us 
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/proposed.shtml). Comments 

are also available for public inspection and copying in the 
Commission's Public Reference Room, 100 F Street, NE., Washington, DC 
20549-1090. All comments received will be posted without change; we do 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: James A. Brigagliano, Associate 
Director, Josephine J. Tao, Branch Chief, Joan M. Collopy, Special 
Counsel, Lillian S. Hagen, Special Counsel, Elizabeth A. Sandoe, 
Special Counsel, Victoria L. Crane, Special Counsel, Office of Trading 
Practices and Processing, Division of Market Regulation, at (202) 551-
5720, at the Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is requesting additional 
public comment on proposed amendments to Rule 203 of Regulation SHO [17 
CFR 242.200 and 242.203] under the Exchange Act. In Release No. 54154 
(July 14, 2006), 71 FR 41710 (July 21, 2006), the Commission proposed 
amendments to Regulation SHO under the Securities Exchange Act of 1934 
(the ``Exchange Act'') intended to further reduce the number of 
persistent fails to deliver in certain equity securities by eliminating 
the grandfather provision and narrowing the options market maker 
exception.\1\ The Commission is re-opening the comment period, which 
ended on September 19, 2006, to provide additional information with 
respect to the Proposal to the public.
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    \1\ The Commission also proposed amendments to update the market 
decline limitation referenced in Regulation SHO.
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    Commenters have urged the Commission to provide additional data 
related to the Proposal before it determines whether additional 
rulemaking is necessary.\2\ In formulating the Proposal, the Commission 
relied primarily on data collected by the National Association of 
Securities Dealers, Inc. (``NASD''). NASD collected this data through 
confidential queries and examinations of member firms. As a result, the 
Commission did not provide the data underlying the examinations and 
discussions because it was concerned that the data contained 
confidential, company-specific examination findings and discussions. 
However, in response to commenters' requests for data, the NASD 
submitted a comment letter on March 12, 2007 that provides the NASD's 
findings in summary form with confidential, company-specific 
information removed.\3\
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    \2\ See e.g., Comments of Keith F. Higgins, Chair, Committee on 
Federal Regulation of Securities, American Bar Association 
(September 27, 2006) (stating that ``without the benefit of knowing 
the information relied upon by the Commission in analyzing the cause 
or causes of the current fails to deliver and the likelihood that 
the proposed changes will reduce those fails to deliver, commenters 
are deprived of the opportunity to opine on the significance of the 
examination results or the Commission's interpretation of such 
information''); comments of Alan Schwartz, Novato, California 
(September 19, 2006) (requesting ``strong empirical data for the 
existence of problems * * *''); comments of Margaret Wiermanski, 
Chief Operations Officer, and Matthew Abraham, Compliance Officer, 
CTC LLC (September 28, 2006) (stating, ``What is not clear in the 
current Proposing Amendments is any research that would evidence the 
anticipated levels of additional improvements in eliminating fails 
to deliver.'')
    \3\ See File No. S7-12-06, Comments of the National Association 
of Securities Dealers, Inc. (March 12, 2007).
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    Accordingly, the Commission is re-opening the comment period to 
highlight the fact that additional data has become available and to 
provide the public with an opportunity to comment on this data. In 
addition, in re-opening the comment period, the Commission also directs 
the public's attention to additional data that may be of interest to 
commenters seeking information on the reasons why fails may be 
persisting since the adoption of Regulation SHO: \4\
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    \4\ See Securities Exchange Act Release No. 50103 (July 28, 
2004), 69 FR 48008 (August 6, 2004).
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    [cir] Prior to the Commission's Proposal, the New York Stock 
Exchange LLC (the ``NYSE'') informed the Commission that it conducted a 
review of five securities with substantial aged fail positions from 
July 1, 2005 through September 23, 2005. The NYSE found that the aged 
fail positions in these five securities were

[[Page 15080]]

attributable to one broker-dealer. This broker-dealer informed the NYSE 
that the fail positions were not being closed out because it was 
relying on the options market maker exception.
    [cir] Prior to the Commission's Proposal, the Commission's Office 
of Compliance and Inspections (``OCIE'') conducted some examinations 
for Regulation SHO compliance and found that some broker-dealers were 
still carrying a significant amount of fails to deliver in securities 
that they were not closing out because they were relying on the 
grandfather provision. One broker-dealer indicated that it had not 
closed out several persistent fails in threshold securities because it 
was relying on the options market maker exception.
    Therefore, the Commission is re-opening the comment period for 
Exchange Act Release No. 54154 from the date of this release through 
April 30, 2007.

    By the Commission.

    Dated: March 26, 2007.
Nancy M. Morris,
Secretary.
[FR Doc. E7-5870 Filed 3-29-07; 8:45 am]

BILLING CODE 8010-01-P