Document ID: SEC-2008-0166-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2008-02-01T05:00Z

[Federal Register: February 1, 2008 (Volume 73, Number 22)]
[Notices]               
[Page 6234-6235]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01fe08-130]                         

[[Page 6234]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[(Release No. 34-57217; File No. SR-FINRA-2008-003]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Extend the Pilot Regarding the Use of Multiple 
MPIDs on the Trade Reporting Facilities and the Alternative Display 
Facility

January 28, 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 18, 2008, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') (f/k/a 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 substantially prepared by FINRA. FINRA 
has filed the proposed rule change pursuant to Section 19(b)(3)(A) of 
the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the 
proposal effective upon filing with the Commission. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to amend NASD Rules 4613A and 5140 to extend 
through January 30, 2009, the current rules regarding the use of 
multiple Market Participant Symbols (``MPIDs'') on the Trade Reporting 
Facilities (``TRFs'') and the Alternative Display Facility (``ADF''). 
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
    (A) NASD Rule 4613A and IM-4613A-1
    NASD Rule 4613A(b) (Character of Quotations) provides that a 
Registered Reporting ADF electronic communications network (``ECN'') 
may request additional MPIDs for displaying quotes and orders and 
reporting trades through the ADF trade reporting facility, the Trade 
Reporting and Comparison Service, for any ADF-Eligible Security. A 
Registered Reporting ADF ECN that is permitted the use of additional 
MPIDs for displaying quotes and orders is subject to the same rules 
applicable to the member's first quotation (i.e., an ECN that displays 
one or more additional quotes/orders is required to comply with all 
rules applicable to ECNs in their display of quotes/orders). A 
Registered Reporting ADF ECN is also prohibited from using an 
additional MPID to accomplish indirectly what it is prohibited from 
doing directly through its Primary MPID. In addition, FINRA staff 
retains full discretion to determine whether a bona fide regulatory 
and/or business need exists for being granted an additional MPID and to 
limit or withdraw the additional MPID display privilege at any time. 
The procedures for requesting, and the restrictions surrounding the use 
of, multiple MPIDs are set forth in IM-4613A-1 (Procedures for 
Allocation of Multiple MPIDs).
    The Commission approved NASD Rule 4613A(b) and IM-4613A-1 on a 
pilot basis on August 11, 2006.\5\ By its terms, the initial pilot 
period expired on January 26, 2007.\6\ On January 31, 2007, the 
Commission approved a one-year extension of the pilot period until 
January 25, 2008.\7\ FINRA believes that an additional one-year 
extension until January 30, 2009, will provide additional time to 
analyze the use of multiple MPIDs on the ADF. FINRA is not proposing 
any other changes to the pilot as this time.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 54307 (August 11, 
2006), 71 FR 47551 (August 17, 2006).
    \6\ The expiration of the pilot period coincided with the 
expiration of the ADF pilot period. See Securities Exchange Act 
Release No. 53699 (April 21, 2006), 71 FR 25271 (April 28, 2006). On 
January 26, 2007, the Commission approved a proposed rule change to 
make the ADF rules permanent. See Securities Exchange Act Release 
No. 55181 (January 26, 2007), 72 FR 5093 (February 2, 2007).
    \7\ See Securities Exchange Act Release No. 55206 (January 31, 
2007), 72 FR 5479 (February 6, 2007).
---------------------------------------------------------------------------

    (B) NASD Rule 5140 and IM-5140
    NASD Rule 5140 (Multiple MPIDs for Trade Reporting Facility 
Participants) provides that any Trade Reporting Facility Participant 
that wishes to use more than one MPID for purposes of reporting trades 
to a TRF must submit a written request to, and obtain approval from, 
NASD Operations for such additional MPIDs. In addition, IM-5140 (Use of 
Multiple MPIDs) states that FINRA considers the issuance of, and trade 
reporting with, multiple MPIDs to be a privilege and not a right. A 
Trade Reporting Facility Participant must identify the purpose(s) and 
system(s) for which the multiple MPIDs will be used. If FINRA 
determines that the use of multiple MPIDs is detrimental to the 
marketplace, or that a Trade Reporting Facility Participant is using 
one or more additional MPIDs improperly or for other than the 
purpose(s) identified by the Participant, FINRA staff retains full 
discretion to limit or withdraw its grant of the additional MPID(s) to 
such Trade Reporting Facility Participant. FINRA believes that Rule 
5140 and IM-5140 are necessary to consolidate the process of issuing, 
and tracking the use of, multiple MPIDs used to report trades to TRFs.
    The Commission approved NASD Rule 5140 on a pilot basis on November 
6, 2006.\8\ By its terms, the pilot period expired on January 26, 2007. 
On January 31, 2007, the Commission approved a one-year extension of 
the pilot period until January 25, 2008.\9\ FINRA believes that an 
additional one-year extension until January 30, 2009, will provide 
additional time to analyze the use of multiple MPIDs on the TRFs. FINRA 
is not proposing any other changes to the pilot as this time.
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 54715 (November 6, 
2006), 71 FR 66354 (November 14, 2006); see also Securities Exchange 
Act Release No. 54715A (November 14, 2006), 71 FR 67183 (November 
20, 2006) (correcting original approval order).
    \9\ See Securities Exchange Act Release No. 55206 (January 31, 
2007), 72 FR 5479 (February 6, 2007).
---------------------------------------------------------------------------

    FINRA is proposing to implement the proposed rule change on January 
25, 2008.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of 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

[[Page 6235]]

practices, to promote just and equitable principles of trade, and, in 
general, to protect investors and the public interest. FINRA believes 
that the proposed rule change is consistent with these requirements 
because it will provide a process by which ECNs (in the case of the 
ADF) and Trade Reporting Facility Participants (in the case of TRFs) 
can request, and FINRA can properly allocate, the use of additional 
MPIDs for displaying quotes and orders through the ADF or reporting 
trades to a TRF.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will impose 
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

    FINRA has neither solicited nor received written comments on the 
proposed rule change.

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

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) Impose any significant burden on competition; and
    (iii) Become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, if 
consistent with the protection of investors and public interest, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \11\ and 
Rule 19b-4(f)(6) thereunder.\12\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19-4(f)(6). In addition, Rule 19-4(f)(6)(iii) 
requires that a self-regulatory organization submit to the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the date of filing of 
the proposed rule change, or such shorter time as designated by the 
Commission. FINRA has satisfied this requirement.
---------------------------------------------------------------------------

    FINRA has requested that the Commission waive the 30-day operative 
delay, which would make the rule change operative immediately upon 
filing with the Commission. The Commission believes waiving the 30-day 
operative date is consistent with the protection of investors and the 
public interest because the proposed rule change extends without 
interruption the benefits of a pilot program that the Commission 
approved and previously extended.\13\ Furthermore, the Commission 
agrees that extending the pilot for another year will provide 
additional time for FINRA to analyze the use of multiple MPIDs on the 
ADR. For these reasons, the Commission designates the proposal to be 
effective and operative upon filing with the Commission.\14\
---------------------------------------------------------------------------

    \13\ See supra notes 5 through 9.
    \14\ For purposes only of waiving the 30-day pre-operative 
period, the Commission has considered the impact of the proposed 
rule change on efficiency, competition, and capital formation. See 
15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    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.\15\
---------------------------------------------------------------------------

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

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 rule-comments@sec.gov. Please include 

File Number SR-FINRA-2008-003 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 Number SR-FINRA-2008-003. 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such 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 Number SR-FINRA-2008-003 and should be 
submitted on or before February 22, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
[FR Doc. E8-1850 Filed 1-31-08; 8:45 am]

BILLING CODE 8011-01-P