Document ID: SEC-2009-0314-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2009-03-10T04:00Z

[Federal Register: March 10, 2009 (Volume 74, Number 45)]
[Notices]               
[Page 10319-10321]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10mr09-109]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59490; File No. SR-FINRA-2009-007]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Amend Incorporated NYSE Rules 12 (``Business 
Day'') and 282 (Buy-in Procedures) and To Delete Incorporated NYSE Rule 
177 (Delivery Time--``Cash'' Contracts) Relating to the Elimination of 
NYSE Members' Ability To Enter Orders on the NYSE With Settlement 
Instructions of ``Cash,'' ``Next Day'' and ``Seller's Option''

March 3, 2009.
    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 February 20, 2009, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc. 
(``NASD'')) filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by FINRA. FINRA has designated 
the proposed rule change as constituting a ``non-controversial'' rule 
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which 
renders the proposal effective upon receipt of this filing by 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\ 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 Incorporated NYSE Rules 12 (``Business 
Day'') and 282 (Buy-in Procedures), and to delete Incorporated NYSE 
Rule 177 (Delivery Time--``Cash'' Contracts) \4\ to conform to the 
proposed rule change by the New York Stock Exchange, LLC (``NYSE'') to 
its versions of Rules 12, 177 and 282.\5\
---------------------------------------------------------------------------

    \4\ The current FINRA rulebook consists of (1) FINRA Rules; (2) 
NASD Rules; and (3) rules incorporated from NYSE (``Incorporated 
NYSE Rules'') (together, the NASD Rules and Incorporated NYSE Rules 
are referred to as the ``Transitional Rulebook''). While the NASD 
Rules generally apply to all FINRA members, the Incorporated NYSE 
Rules apply only to those members of FINRA that are also members of 
the NYSE (``Dual Members''). The FINRA Rules apply to all FINRA 
members, unless such rules have a more limited application by their 
terms. For more information about the rulebook consolidation 
process, see FINRA Information Notice, March 12, 2008 (Rulebook 
Consolidation Process).
    \5\ See Securities Exchange Act Rel. No. 59446 (February 25, 
2009) (File No. SR-NYSE-2009-17).
---------------------------------------------------------------------------

    The text of the proposed rule change is available on FINRA's Web 
site at http://www.finra.org, at the principal office of FINRA 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, 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
    FINRA is proposing changes to Incorporated NYSE Rules 12,\6\ 177 
\7\ and 282 \8\ to conform these rules to recent amendments made by 
NYSE. The NYSE's amendments remove references to certain settlement 
instructions that are no longer compatible with the NYSE's electronic 
market. These include instructions to settle on ``cash,'' ``next day'' 
or ``seller's option'' basis.
---------------------------------------------------------------------------

    \6\ Incorporated NYSE Rule 12 defines the term ``business day.''
    \7\ Incorporated NYSE Rule 177 states the delivery time for 
``cash'' contracts.
    \8\ Incorporated NYSE Rule 282 sets forth buy-in procedures.
---------------------------------------------------------------------------

    As described by the NYSE in its filing,\9\ in the NYSE's current 
environment, orders received by NYSE systems that are marketable upon 
entry are eligible to be immediately and automatically executed. 
According to the NYSE, order types and settlement instructions that 
require manual intervention pose significant

[[Page 10320]]

impediments to the efficient functioning of the NYSE's market. In 
addition, the NYSE states that the ability to have market participants' 
orders executed in the most efficient manner necessitates the 
elimination of cash, next day and seller's option as valid settlement 
instructions for orders submitted to the NYSE. It adds that because 
these instructions result in the orders printing to paper, the manual 
intervention required in the processing of these orders puts the orders 
at the very real risk of ``missing the market'' as a result of the 
current speed of order execution in the NYSE market. Under the NYSE 
filing, references to cash, next day and seller's option were deleted 
from NYSE Rules 12 (``Business Day'') and 282 (Buy-in Procedures) as 
valid settlement instructions for orders submitted to the NYSE. In 
addition, the NYSE eliminated NYSE Rule 177 (Delivery Time--``Cash'' 
Contracts).\10\
---------------------------------------------------------------------------

    \9\ See supra note 3 [sic]. The Commission notes that the 
correct cross-reference is to note 5.
    \10\ Id.
---------------------------------------------------------------------------

    Given these changes, FINRA is proposing to make conforming changes 
to Incorporated NYSE Rules 12, 177 and 282 to ensure consistency with 
NYSE's versions of Rules 12, 177 and 282.\11\
---------------------------------------------------------------------------

    \11\ Pursuant to Rule 17d-2 under the Exchange Act, NASD, NYSE, 
and NYSE Regulation, Inc. entered into an agreement (``Agreement'') 
to reduce regulatory duplication for firms that are Dual Members by 
allocating certain regulatory responsibilities for selected NYSE 
rules from NYSE Regulation to FINRA. The Agreement includes a list 
of all those rules (``Common Rules'') for which FINRA has assumed 
examination, enforcement and surveillance responsibilities under the 
Agreement relating to compliance by Dual Members to the extent that 
such responsibilities involve member firm regulation. See Securities 
Exchange Act Release No. 56148 (July 26, 2007), 72 FR 42146 (August 
1, 2007) (Notice of Filing and Order Approving and Declaring 
Effective a Plan for the Allocation of Regulatory Responsibilities). 
The Common Rules are the same NYSE rules that FINRA has incorporated 
into its rulebook. See Securities Exchange Act Release No. 56147 
(July 26, 2007), 72 FR 42166 (August 1, 2007) (Notice of Filing and 
Order Granting Accelerated Approval of Proposed Rule Change to 
Incorporate Certain NYSE Rules Relating to Member Firm Conduct; File 
No. SR-NASD-2007-054).
---------------------------------------------------------------------------

2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\12\ which requires, among 
other things, that FINRA rules must 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. FINRA believes that the proposed rule change is 
necessary and appropriate to reduce the risk of customers missing the 
market and possibly receiving inferior priced executions because of 
legacy NYSE settlement instructions and to maintain consistency with 
the NYSE's amendments to its Rules 12, 177 and 282.
---------------------------------------------------------------------------

    \12\ 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 result in 
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

    Written comments were neither solicited nor received.

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

    Because the 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 after the date of the filing, or such shorter time as the 
Commission may designate, if consistent with the protection of 
investors and the public interest, it has become effective pursuant to 
Section 19(b)(3)(A) \13\ of the Act and Rule 19b-4(f)(6) 
thereunder.\14\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative until 30 days after the date of filing.\15\ 
However, Rule 19b-4(f)(6)(iii) \16\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. FINRA has requested that the 
Commission waive the 30-day operative delay so that the proposed rule 
change may become operative on March 13, 2009, the same date that 
NYSE's amendments are implemented. The Commission believes that 
allowing the proposed rule change to become operative on March 13, 2009 
is consistent with the protection of investors and the public interest. 
The Commission notes that FINRA is merely revising its rules to conform 
to a proposed rule change by the NYSE that will be operative on March 
13, 2009,\17\ which will allow FINRA's Incorporated NYSE Rules to 
maintain their status as Common Rules under the Agreement. Accordingly, 
the Commission designates the proposed rule change to be operative on 
March 13, 2009.\18\
---------------------------------------------------------------------------

    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii) In addition, Rule 19b-
4(f)(6)(iii) requires a self-regulatory organization to give the 
Commission written notice of its intent to file 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. The Exchange has satisfied this requirement.
    \17\ See Securities Exchange Act Release No. 59446 (Feb. 25, 
2009) (File No. SR-NYSE-2009-17).
    \18\ For purposes only of waiving the 30-day operative delay of 
the proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition and capital formation. 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.

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-2009-007 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2009-007. 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

[[Page 10321]]

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 the 
filing also will be available for inspection and copying at the 
principal office of the Exchange. 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-2009-007 and should be submitted on or before 
March 31, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-4965 Filed 3-9-09; 8:45 am]

BILLING CODE 8011-01-P