Document ID: SEC-2007-0077-0001
Agency: sec
Document Type: Notice
Title: Securities Exchange Act: International Securities Exchange, LLC and National Association of Securities Dealers, Inc.; regulatory responsibilities allocation plan
Posted Date: 2007-01-17T05:00Z

[Federal Register: January 17, 2007 (Volume 72, Number 10)]
[Notices]               
[Page 2040-2044]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17ja07-83]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55057; File No. 4-529]

 
Program for Allocation of Regulatory Responsibilities Pursuant to 
Rule 17d-2; Notice of Filing of Proposed Plan for the Allocation of 
Regulatory Responsibilities Between the International Securities 
Exchange, LLC and the National Association of Securities Dealers, Inc.

January 8, 2007.
    Pursuant to Section 17(d) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 17d-2 thereunder,\2\ notice is hereby given that 
on December 20, 2006, the International Securities Exchange, LLC 
(``ISE'') and the National Association of Securities Dealers, Inc. 
(``NASD'') (together with the ISE, the ``Parties'') filed with the 
Securities and Exchange Commission (``Commission'') an amended and 
restated plan for the allocation of regulatory responsibilities. The 
Commission is publishing this notice to solicit comments on the amended 
and restated 17d-2 plan from interested persons.
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    \1\ 15 U.S.C. 78q(d).
    \2\ 17 CFR 240.17d-2.
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I. Introduction

    Section 19(g)(1) of the Act,\3\ among other things, requires every 
self-regulatory organization (``SRO'') registered as either a national 
securities exchange or registered national securities association to 
examine for, and enforce compliance by, its members and persons 
associated with its members with the Act, the rules and regulations 
thereunder, and the SRO's own rules, unless the SRO is relieved of this 
responsibility pursuant to Section 17(d) \4\ or Section 19(g)(2) \5\ of 
the Act. Without this relief, the statutory obligation of each 
individual SRO could result in a pattern of multiple examinations of 
broker-dealers that maintain memberships in more than one SRO (``common 
members''). Such regulatory duplication would add unnecessary expenses 
for common members and their SROs.
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    \3\ 15 U.S.C. 78s(g)(1).
    \4\ 15 U.S.C. 78q(d).
    \5\ 15 U.S.C. 78s(g)(2).
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    Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate 
unnecessary multiple examinations and regulatory duplication.\7\ With 
respect to a common member, Section 17(d)(1) authorizes the Commission, 
by rule or order, to relieve an SRO of the responsibility to receive 
regulatory reports, to examine for and enforce compliance with 
applicable statutes, rules, and regulations, or to perform other 
specified regulatory functions.
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    \6\ 15 U.S.C. 78q(d)(1).
    \7\ See Securities Act Amendments of 1975, Report of the Senate 
Committee on Banking, Housing, and Urban Affairs to Accompany S. 
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
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    To implement Section 17(d)(1), the Commission adopted two rules: 
Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the 
Commission to name a single SRO as the designated examining authority 
(``DEA'') to examine common members for compliance with the financial 
responsibility requirements imposed by the Act, or by Commission or SRO 
rules.\9\ When an SRO has been named as a common member's DEA, all 
other SROs to which the common member belongs are relieved of the 
responsibility to examine the firm for compliance with the applicable 
financial responsibility rules. On its face, Rule 17d-1 deals only with 
an SRO's obligations to enforce member compliance with financial 
responsibility requirements. Rule 17d-1 does not relieve an SRO from 
its obligation to examine a common member for compliance with its own 
rules and provisions of the federal securities laws governing matters 
other than financial responsibility, including sales practices and 
trading activities and practices.
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    \8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
    \9\ See Securities Exchange Act Release No. 12352 (April 20, 
1976), 41 FR 18808 (May 7, 1976).
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    To address regulatory duplication in these and other areas, the 
Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits 
SROs to propose joint plans for the allocation of regulatory 
responsibilities with respect to their common members. Under paragraph 
(c) of Rule 17d-2, the Commission may declare such a plan effective if, 
after providing for notice and comment, it determines that the plan is 
necessary or appropriate in the public interest and for the protection 
of investors, to foster cooperation and coordination among the SROs, to 
remove impediments to, and foster the development of, a national market 
system and a national clearance and settlement system, and is in 
conformity with the factors set forth in Section 17(d) of the Act. 
Commission approval of a plan filed pursuant to Rule 17d-2 relieves an 
SRO of those regulatory responsibilities allocated by the plan to 
another SRO.
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    \10\ See Securities Exchange Act Release No. 12935 (October 28, 
1976), 41 FR 49091 (November 8, 1976).
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II. Proposed Plan

    The Parties currently operate pursuant to a 17d-2 plan in which 
NASD has assumed certain inspection, examination, and enforcement 
responsibility for common members with respect to certain applicable 
laws, rules, and regulations (the ``current NASD-ISE 17d-2 Plan'').\11\ 
On September 28, 2006, the Commission approved a proposed rule change 
submitted by ISE relating to the adoption of rules to govern its 
electronic trading system for equities.\12\ In that filing, ISE 
represented that it would enter into a 17d-2 agreement with NASD to 
delegate to NASD all regulatory oversight and enforcement 
responsibilities with respect to the ISE's outbound routing facility 
pursuant to applicable laws.\13\
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    \11\ See Securities Exchange Act Release Nos. 42668 (April 11, 
2000), 65 FR 21048 (April 19, 2000 (File No. 4-431) (notice of 
filing); and 42815 (May 23, 2000), 65 FR 34762 (May 31, 2000) (File 
No. 4-431) (order).
    \12\ See Securities Exchange Act Release No. 54528 (September 
28, 2006), 71 FR 58650 (October 4, 2006) (SR-ISE-2006-48).
    \13\ See id. at 71 FR 58654.
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    On December 20, 2006, the Parties submitted an amended and restated 
17d-2 plan for review by the Commission. The amended and restated 17d-2 
plan, which would replace and supersede the current NASD-ISE 17d-2 Plan 
and all prior amendments thereto in their entirety, is intended to 
reduce regulatory duplication for firms that are

[[Page 2041]]

common members of both ISE and NASD and to address regulation of the 
ISE's outbound routing facility for its new electronic trading system 
for equities. The text of the plan delineates regulatory 
responsibilities with respect to the Parties, including responsibility 
for ISE rules. Included in the amended and restated plan is an exhibit 
(the ``ISE Certification of Common Rules,'' referred to herein as the 
``Certification'') that lists every ISE rule and the federal securities 
laws, rules, and regulations thereunder for which, under the plan, NASD 
would bear responsibility for overseeing and enforcing with respect to 
common members. In particular, under the amended and restated 17d-2 
plan, NASD would assume examination and enforcement responsibility 
relating to compliance by dual members and persons associated therewith 
with the rules of ISE that are substantially similar to the applicable 
rules of NASD (``Common Rules''),\14\ as well as any provisions of the 
federal securities laws and the rules and regulations thereunder 
delineated in the Certification.\15\ Under the plan, ISE would retain 
full responsibility for surveillance and enforcement with respect to 
trading activities or practices involving ISE's own marketplace, 
including, without limitation, ISE's rules relating to the rights and 
obligations of market makers; registration pursuant to its unique rules 
(i.e., non-Common Rules); its duties as a DEA pursuant to Rule 17d-1 
under the Act; and any rules that are not Common Rules, except for ISE 
rules for any ISE member that operates as a facility,\16\ acts as an 
outbound router for the ISE, and is a member of NASD (the ``Router 
Member'').\17\
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    \14\ See paragraph 1(b) of the amended and restated 17d-2 plan 
(defining Common Rules).
    \15\ See paragraph 1(f) of the amended and restated 17d-2 plan. 
The Commission notes that there are currently no federal securities 
law rules listed on the Certification.
    \16\ See Section 3(a)(2) of the Act (defining ``facility''). 15 
U.S.C. 78c(a)(2).
    \17\ Apparent violations of such rules by any such entity will 
be processed by, and enforcement proceedings will be conducted by, 
the NASD. See paragraph 2(d) of the amended and restated 17d-2 plan. 
As of the date of the amended and restated 17d-2 plan, ISE Route LLC 
is the only Router Member.
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    The text of the amended and restated 17d-2 plan is as follows:

Agreement Between NASD and International Securities Exchange LLC 
Pursuant to Rule 17d-2 Under the Securities Exchange Act of 1934

    This Agreement, by and between the National Association of 
Securities Dealers, Inc. (``NASD'') and the International Securities 
Exchange LLC (``ISE''), is made this 20th day of December, 2006 (the 
``Agreement''), pursuant to Section 17(d) of the Securities Exchange 
Act of 1934 (the ``Exchange Act'') and Rule 17d-2 thereunder which 
permits agreements between self-regulatory organizations to allocate 
regulatory responsibility to eliminate regulatory duplication. NASD and 
ISE may be referred to individually as a ``party'' and together as the 
``parties.''
    This Agreement amends and restates the agreement entered into 
between the parties on April 3, 2000 and amended on April 27, 2000, 
entitled ``Agreement Between the National Association of Securities 
Dealers, Inc., NASD Regulation, Inc. and the International Securities 
Exchange LLC Pursuant to Section 17(d) and Rule 17d-2,'' and any 
subsequent amendments thereafter.
    Whereas, NASD and ISE desire to reduce duplication in the 
examination of their Dual Members (as defined herein) and in the filing 
and processing of certain registration and membership records; and
    Whereas, NASD and ISE desire to execute an agreement covering such 
subjects pursuant to the provisions of Rule 17d-2 under the Exchange 
Act and to file such agreement with the Securities and Exchange 
Commission (the ``SEC'' or ``Commission'') for its approval.
    Now, therefore, in consideration of the mutual covenants contained 
hereinafter, NASD and ISE hereby agree as follows:
    1. Definitions.
    Unless otherwise defined in this Agreement or the context otherwise 
requires, the terms used in this Agreement shall have the same meaning 
as they have under the Exchange Act and the rules and regulations 
thereunder. As used in this Agreement, the following terms shall have 
the following meanings:
    (a) ``ISE Rules'' or ``NASD Rules'' shall mean the rules of the ISE 
or NASD, respectively, as the rules of an exchange or association are 
defined in Exchange Act Section 3(a)(27).
    (b) ``Common Rules'' shall mean the ISE Rules that are 
substantially similar to the applicable NASD Rules in that examination 
for compliance with such rules would not require NASD to develop one or 
more new examination standards, modules, procedures, or criteria in 
order to analyze the application of the rule, or a Dual Member's 
activity, conduct, or output in relation to such rule.
    (c) ``Dual Members'' shall mean those ISE members that are also 
members of NASD and the associated persons therewith.
    (d) ``Effective Date'' shall have the meaning set forth in 
paragraph 14.
    (e) ``Enforcement Responsibilities'' shall mean the conduct of 
appropriate proceedings, in accordance with the NASD Code of Procedure 
(the Rule 9000 Series) and other applicable NASD procedural rules, to 
determine whether violations of pertinent laws, rules or regulations 
have occurred, and if such violations are deemed to have occurred, the 
imposition of appropriate sanctions as specified under the NASD's Code 
of Procedure and sanctions guidelines.
    (f) ``Regulatory Responsibilities'' shall mean the examination 
responsibilities and Enforcement Responsibilities relating to 
compliance by the Dual Members with the Common Rules and the provisions 
of the Exchange Act and the rules and regulations thereunder, and other 
applicable laws, rules and regulations, each as set forth on Exhibit 1 
attached hereto.
    2. Regulatory and Enforcement Responsibilities.
    NASD shall assume Regulatory Responsibilities and Enforcement 
Responsibilities for Dual Members. Attached as Exhibit 1 to this 
Agreement and made part hereof, ISE furnished NASD with a current list 
of Common Rules and certified to NASD that such rules are substantially 
similar to the corresponding NASD rule (the ``Certification''). NASD 
hereby agrees that the rules listed in the Certification are Common 
Rules as defined in this Agreement. Each year following the Effective 
Date of this Agreement, or more frequently if required by changes in 
either the rules of ISE or NASD, ISE shall submit an updated list of 
Common Rules to NASD for review which shall add ISE rules not included 
in the current list of Common Rules that qualify as Common Rules as 
defined in this Agreement; delete ISE rules included in the current 
list of Common Rules that no longer qualify as Common Rules as defined 
in this Agreement; and confirm that the remaining rules on the current 
list of Common Rules continue to be ISE rules that qualify as Common 
Rules as defined in this Agreement. Within 30 days of receipt of such 
updated list, NASD shall confirm in writing whether the rules listed in 
any updated list are Common Rules as defined in this Agreement. 
Notwithstanding anything herein to the contrary, it is explicitly 
understood that the term ``Regulatory Responsibilities'' does not 
include, and ISE shall retain full responsibility for (unless otherwise 
addressed by separate agreement or rule) the following:

[[Page 2042]]

    (a) Surveillance and enforcement with respect to trading activities 
or practices involving ISE's own marketplace, including without 
limitation ISE's rules relating to the rights and obligations of market 
makers;
    (b) registration pursuant to its applicable rules of associated 
persons (i.e., registration rules that are not Common Rules);
    (c) discharge of its duties and obligations as a Designated 
Examining Authority pursuant to Rule 17d-1 under the Exchange Act; and
    (d) any ISE Rules that are not Common Rules, except for ISE Rules 
for any ISE member that operates as a facility (as defined in Section 
3(a)(2) of the Exchange Act), acts as an outbound router for the ISE 
and is a member of NASD (``Router Member'') as provided in paragraph 6. 
As of the date of this Agreement, ISE Route LLC is the only Router 
Member.
    3. Dual Members.
    Prior to the Effective Date, ISE shall furnish NASD with a current 
list of Dual Members, which shall be updated no less frequently than 
once each quarter.
    4. No Charge.
    There shall be no charge to ISE by NASD for performing the 
Regulatory Responsibilities and Enforcement Responsibilities under this 
Agreement except as hereinafter provided. NASD shall provide ISE with 
ninety (90) days advance written notice in the event NASD decides to 
impose any charges to ISE for performing the Regulatory 
Responsibilities under this Agreement. If NASD determines to impose a 
charge, ISE shall have the right at the time of the imposition of such 
charge to terminate this Agreement; provided, however, that NASD's 
Regulatory Responsibilities under this Agreement shall continue until 
the Commission approves the termination of this Agreement.
    5. Reassignment of Regulatory Responsibilities.
    Notwithstanding any provision hereof, this Agreement shall be 
subject to any statute, or any rule or order of the Commission, or 
industry agreement, restructuring the regulatory framework of the 
securities industry or reassigning Regulatory Responsibilities between 
self-regulatory organizations. To the extent such action is 
inconsistent with this Agreement, such action shall supersede the 
provisions hereof to the extent necessary for them to be properly 
effectuated and the provisions hereof in that respect shall be null and 
void.
    6. Notification of Violations.
    In the event that NASD becomes aware of apparent violations of any 
ISE Rules, which are not listed as Common Rules, discovered pursuant to 
the performance of the Regulatory Responsibilities assumed hereunder, 
NASD shall notify ISE of those apparent violations for such response as 
ISE deems appropriate. Apparent violations of all other applicable 
rules, including violations of the Common Rules, various securities 
acts, and rules and regulations thereunder, shall be processed by, and 
enforcement proceedings in respect thereto shall be conducted by NASD 
as provided hereinbefore; provided, however, that in the event a Dual 
Member is the subject of an investigation relating to a transaction on 
the ISE, ISE may in its discretion assume concurrent jurisdiction and 
responsibility. With respect to apparent violations of any ISE Rules by 
any Router Member, NASD shall not make referrals to ISE pursuant to 
this paragraph 6. Such apparent violations shall be processed by, and 
enforcement proceedings in respect thereto will be conducted by, NASD 
as provided in this Agreement. Each party agrees to make available 
promptly all files, records and witnesses necessary to assist the other 
in its investigation or proceedings.
    7. Continued Assistance.
    NASD shall make available to ISE all information obtained by NASD 
in the performance by it of the Regulatory Responsibilities hereunder 
in respect to the Dual Members subject to this Agreement. In 
particular, and not in limitation of the foregoing, NASD shall furnish 
ISE any information it obtains about Dual Members which reflects 
adversely on their financial condition. It is understood that such 
information is of an extremely sensitive nature and, accordingly, ISE 
acknowledges and agrees to take all reasonable steps to maintain its 
confidentiality. ISE shall make available to NASD any information 
coming to its attention that reflects adversely on the financial 
condition of Dual Members or indicates possible violations of 
applicable laws, rules or regulations by such firms.
    8. Dual Member Applications.
    a. Dual Members subject to this Agreement shall be required to 
submit, and NASD shall be responsible for processing and acting upon 
all applications submitted on behalf of allied persons, partners, 
officers, registered personnel and any other person required to be 
approved by the rules of both ISE and NASD or associated with Dual 
Members thereof. Upon request, NASD shall advise ISE of any changes of 
allied members, partners, officers, registered personnel and other 
persons required to be approved by the rules of both ISE and NASD.
    b. Dual Members shall be required to send to NASD all letters, 
termination notices or other material respecting the individuals listed 
in paragraph 8(a).
    c. When as a result of processing such submissions NASD becomes 
aware of a statutory disqualification as defined in the Exchange Act 
with respect to a Dual Member, NASD shall determine pursuant to 
Sections 15A(g) and/or Section 6(c) of the Exchange Act the 
acceptability or continued applicability of the person to whom such 
disqualification applies and keep ISE advised of its actions in this 
regard for such subsequent proceedings as ISE may initiate.
    d. Notwithstanding the foregoing, NASD shall not review the 
membership application, reports, filings, fingerprint cards, notices, 
or other writings filed to determine if such documentation submitted by 
a broker or dealer, or a person associated therewith or other persons 
required to register or qualify by examination: (i) Meets the ISE 
requirements for general membership or for specified categories of 
membership or participation in the ISE, such as (A) Primary Market 
Maker Membership (``PMM''); (B) Competitive Market Maker Membership 
(``CMM''); (C) Electronic Access Membership (``EAM'') (or any similar 
type of ISE membership or participation that is created after this 
Agreement is executed); or (ii) meets the ISE requirements to be 
associated with, or employed by, an ISE member or participant in any 
capacity, such a Designated Trading Representative (``DTR'') (or any 
similar type of participation, employment category or title, or 
associate-person category or class that is created after this Agreement 
is executed). NASD shall not review applications or other documentation 
filed to request a change in the rights or status described in this 
paragraph 8(d), including termination or limitation on activities, of a 
member or a participant of the ISE, or a person associated with, or 
requesting association with, a member or participant of the ISE.
    9. Branch Office Information.
    NASD shall also be responsible for processing and, if required, 
acting upon all requests for the opening, address changes, and 
terminations of branch offices by Dual Members and any other 
applications required of Dual Members with respect to the Common Rules 
as they may be amended from time to time. NASD shall advise ISE monthly 
of the opening, address change and termination of branch and main 
offices of Dual Members and the names of such branch office managers.
    10. Customer Complaints.

[[Page 2043]]

    ISE shall forward to NASD copies of all customer complaints 
involving Dual Members received by ISE relating to NASD's Regulatory 
Responsibilities under this Agreement. It shall be NASD's 
responsibility to review and take appropriate action in respect to such 
complaints.
    11. Advertising.
    NASD shall assume responsibility to review the advertising of Dual 
Members subject to the Agreement, provided that such material is filed 
with NASD in accordance with NASD's filing procedures and is 
accompanied with any applicable filing fees set forth in NASD Rules. 
Such review shall be made in accordance with then applicable NASD rules 
and interpretations. The advertising of Dual Members shall be subject 
only to compliance with appropriate NASD rules and interpretations.
    12. No Restrictions on Regulatory Action.
    Nothing contained in this Agreement shall restrict or in any way 
encumber the right of either party to conduct its own independent or 
concurrent investigation, examination or enforcement proceeding of or 
against Dual Members, as either party, in its sole discretion, shall 
deem appropriate or necessary.
    13. Termination.
    This Agreement may be terminated by ISE or NASD at any time upon 
the approval of the Commission after one (1) year's written notice to 
the other party, except as provided in paragraph 4.
    14. Effective Date.
    This Agreement shall be effective upon approval of the Commission.
    15. Arbitration.
    In the event of a dispute between the parties as to the operation 
of this Agreement, ISE and NASD hereby agree that any such dispute 
shall be settled by arbitration in Washington, DC in accordance with 
the rules of the American Arbitration Association then in effect, or 
such other procedures as the parties may mutually agree upon. Judgment 
on the award rendered by the arbitrator(s) may be entered in any court 
having jurisdiction.
    16. Separate Agreement.
    This Agreement is wholly separate from the multiparty Agreement 
made pursuant to Rule 17d-2 of the Exchange Act between the American 
Stock Exchange LLC, the Boston Stock Exchange, Inc., the Chicago Board 
Options Exchange, Inc., the International Securities Exchange LLC, the 
National Association of Securities Dealers, Inc., the New York Stock 
Exchange, Inc., the Pacific Exchange, Inc., and the Philadelphia Stock 
Exchange, Inc. involving the allocation of regulatory responsibilities 
with respect to common members for compliance with common rules 
relating to the conduct by broker-dealers of accounts for listed 
options or index warrants entered into on January 14, 2004, and as may 
be amended from time to time.
    17. Notification of Members.
    ISE and NASD shall notify Dual Members of this Agreement after the 
Effective Date by means of a uniform joint notice.
    18. Amendment.
    This Agreement may be amended in writing duly approved by each 
party. All such amendments must be filed with and approved by the 
Commission before they become effective.
    19. Limitation of Liability.
    Neither NASD nor ISE nor any of their respective directors, 
governors, officers or employees shall be liable to the other party to 
this Agreement for any liability, loss or damage resulting from or 
claimed to have resulted from any delays, inaccuracies, errors or 
omissions with respect to the provision of Regulatory Responsibilities 
as provided hereby or for the failure to provide any such 
responsibility, except with respect to such liability, loss or damages 
as shall have been suffered by one or the other of NASD or ISE and 
caused by the willful misconduct of the other party or their respective 
directors, governors, officers or employees. No warranties, express or 
implied, are made by NASD or ISE with respect to any of the 
responsibilities to be performed by each of them hereunder.
    20. Relief from Responsibility.
    Pursuant to Sections 17(d)(1)(A) and 19(g) of the Exchange Act and 
Rule 17d-2 thereunder, NASD and ISE join in requesting the Commission, 
upon its approval of this Agreement or any part thereof, to relieve ISE 
of any and all responsibilities with respect to matters allocated to 
NASD pursuant to this Agreement; provided, however, that this Agreement 
shall not be effective until the Effective Date.

Exhibit 1--ISE Certification of Common Rules

    ISE hereby certifies that the requirements contained in the rules 
listed below for ISE are identical to, or substantially similar to, the 
comparable NASD rules identified.

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              ISE Rule(s)                          NASD Rule(s)
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408. Prevention of the Misuse of         3010(a)(2) Supervision.
 Material, Nonpublic Information.
409. Disciplinary Action...............  3070(a)(1) and (a)(10)
                                          Reporting Requirements.
604. Continuing Education for            1120 Continuing Education
 Registered Persons\*\.                   Requirements.
622. Transfer of Accounts..............  11870 Customer Account Transfer
                                          Contracts.
624. Brokers' Blanket Bonds\*\.........  3020 Fidelity Bonds.
626. Telephone Solicitation\*\.........  2212 Telemarketing.
1400. Maintenance, Retention, and        3110(a) Books and Records--
 Furnishing of Books, Records and Other   Requirements.
 Information.
1407. Market Maker Hedge Exemption from  5100 Short Sale Rule; IM-6130
 Nasdaq Short Sale Rule\*\.               Trade Reporting of Short
                                          Sales.
2114. Doing Business with the Public     2310 Recommendations to
 \1\.                                     Customers (Suitability); 2320
                                          Best Execution and
                                          Interpositioning; 2330
                                          Customers' Securities or
                                          Funds; 2340 Customer Account
                                          Statements; 2341 Margin
                                          Disclosure Statement; 2350
                                          Broker/Dealer Conduct on the
                                          Premises of Financial
                                          Institutions; 2360 Approval
                                          Procedures for Day-Trading
                                          Accounts; 2361 Day-Trading
                                          Risk Disclosure Statement;
                                          2370 Borrowing From or Lending
                                          to Customers.
------------------------------------------------------------------------
\1\ In connection with the approval of ISE Rule 2114, the Commission
  noted that since the ISE is requiring Equity EAMs that do business
  with the public to become members of NASD, those ISE members are
  required to comply with NASD rules that govern the practice of members
  when doing business with the public. The Commission noted that, among
  other things, these members would be obligated to comply with these
  listed NASD Rules. See Securities Exchange Act Release No. 54401
  (September 1, 2006), 71 FR 53483 (September 11, 2006) (SR-ISE-2006-
  53).
* ISE will be responsible for any significant differences between its
  rules and the comparable NASD rule identified, until such time
  amendments to such rule(s) may be approved.

[[Page 2044]]

* * * * *

III. Date of Effectiveness of the Proposed Plan and Timing for 
Commission Action

    Pursuant to Section 17(d)(1) of the Act \18\ and Rule 17d-2 
thereunder,\19\ after February 7, 2007, the Commission may, by written 
notice, declare the plan submitted by ISE and NASD, File No. 4-529, to 
be effective if the Commission finds that the plan is necessary or 
appropriate in the public interest and for the protection of investors, 
to foster cooperation and coordination among self-regulatory 
organizations, or to remove impediments to and foster the development 
of the national market system and a national system for the clearance 
and settlement of securities transactions and in conformity with the 
factors set forth in Section 17(d) of the Act.
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    \18\ 15 U.S.C. 78q(d)(1).
    \19\ 17 CFR 240.17d-2.
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IV. Solicitation of Comments

    In order to assist the Commission in determining whether to approve 
the amended and restated 17d-2 plan and to relieve ISE of the 
responsibilities which would be assigned to NASD, interested persons 
are invited to submit written data, views, and arguments concerning the 
foregoing. Comments may be submitted by any of the following methods:

Electronic Comments

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

File Number 4-529 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number 4-529. 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/other.shtml). 

Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed plan that are filed with the 
Commission, and all written communications relating to the proposed 
plan 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 plan also will be 
available for inspection and copying at the principal offices of ISE 
and NASD. 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 Number 4-529 
and should be submitted on or before February 7, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(34).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-539 Filed 1-16-07; 8:45 am]

BILLING CODE 8011-01-P