Document ID: SEC-2007-1224-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2007-08-31T04:00Z

[Federal Register: August 31, 2007 (Volume 72, Number 169)]
[Notice]               
[Page 50425-50426]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31au07-151]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56321; File No. SR-FINRA-2007-003]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Amend NASD Rules 4632C, 6130C and 6130

August 24, 2007.
    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 August 3, 2007, 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, II 
and III below, which Items have been substantially prepared by FINRA. 
FINRA has designated the proposal as a ``non-controversial'' proposed 
rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 
19b-4(f)(6) thereunder,\4\ which rendered 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 proposes to amend NASD Rules 4632C and 6130C relating to the 
NASD/NSX Trade Reporting Facility (the ``NASD/NSX TRF'') to reflect 
certain changes in the facility's functionality and to conform, to the 
extent practicable, to the trade reporting rules relating to FINRA's 
other Trade Reporting Facilities (the ``TRFs'').\5\ FINRA also is 
proposing to amend NASD Rule 6130(a) to clarify that the NASD/Nasdaq 
Trade Reporting Facility (the ``NASD/Nasdaq TRF'') and the OTC 
Reporting Facility will compare and submit to the National Securities 
Clearing Corporation (``NSCC'') trades reported as other than regular 
way settlement.
---------------------------------------------------------------------------

    \5\ Effective July 30, 2007, FINRA was formed through the 
consolidation of NASD and the member regulatory functions of NYSE 
Regulation. Accordingly, the NASD/NSX TRF is now doing business as 
the FINRA/NSX TRF. The formal name change of each TRF is pending and 
once completed, FINRA will file a separate proposed rule change to 
reflect those changes in the Manual.
---------------------------------------------------------------------------

    The text of the proposed rule change is available at the FINRA, the 
Commission's Public Reference Room, and http://www.finra.org.

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
    The TRFs,\6\ including the NASD/NSX TRF, provide members mechanisms 
for reporting trades in exchange-listed securities executed otherwise 
than on an exchange. Currently, the functionality offered by the NASD/
NSX TRF differs from the functionality offered by some of the other 
TRFs and, as a result, the rules relating to the NASD/NSX TRF differ 
from the rules relating to the other TRFs. Specifically, pursuant to 
NASD Rule 4632C(a)(8), the NASD/NSX TRF does not accept trade reports 
for Stop Stock Transactions (as such term is defined in Rule 4200C), 
transactions occurring at prices based on average-weighting or other 
special pricing formulae or transactions that reflect a price different 
from the current market when the execution price is based on a prior 
reference point in time. In addition, pursuant to NASD Rule 6130C(a), 
the NASD/NSX TRF does not accept trades reported as other than regular 
way settlement (i.e., Cash, Next Day and Seller's Option). Under the 
current rules, members must use an alternative electronic mechanism to 
report these transactions to FINRA.
---------------------------------------------------------------------------

    \6\ In addition to the NASD/NSX TRF, there are three other TRFs 
in operation: the NASD/Nasdaq TRF, the NASD/BSE Trade Reporting 
Facility (the ``NASD/BSE TRF'') and the NASD/NYSE Trade Reporting 
Facility (the ``NASD/NYSE TRF''). As noted in footnote 5 above, the 
formal name change of each TRF is pending.
---------------------------------------------------------------------------

    FINRA is proposing to expand the NASD/NSX TRF's functionality such 
that members will be able to report the above-described transactions to 
the NASD/NSX TRF. FINRA is proposing to amend NASD Rules 4632C and 
6130C to reflect this change in functionality and conform, to the 
extent practicable, the NASD/NSX TRF rules to the rules relating to the 
other TRFs.
    FINRA also is proposing to amend NASD Rule 6130(a) to clarify that 
the ``System'' (defined in Rule 6110 to include the NASD/Nasdaq TRF and 
the OTC Reporting Facility) will compare and submit to NSCC trades 
reported as other than regular way settlement. This amendment is 
consistent with current practice and reflects recent changes in the way 
that such trades are processed by NSCC.\7\ Additionally, this amendment 
conforms the text of NASD Rule 6130(a) to the text of amended NASD Rule 
6130C(a), to the extent practicable.\8 \
---------------------------------------------------------------------------

    \7\ See Securities Exchange Release No. 54816 (November 27, 
2006), 71 FR 69604 (December 1, 2006) (order approving SR-NSCC-2006-
09).
    \8\ The corresponding rules relating to the other TRFs differ in 
this regard. NASD Rule 6130D(a) provides that trades reported as 
other than regular way settlement will not be accepted by the NASD/
BSE TRF. NASD Rule 6130E(a) provides that trades reported as other 
than regular way settlement will be accepted by the NASD/NYSE TRF, 
but will not be submitted to clearing. The NASD/NYSE TRF will not 
submit any trades (including regular way settlement trades) to 
clearing; members must have a Qualified Service Representative 
(``QSR'') agreement or similar arrangement in place to clear trades 
submitted to the NASD/NYSE TRF.
---------------------------------------------------------------------------

    FINRA has filed the proposed rule change for immediate 
effectiveness. FINRA will announce the operative date of the proposed 
rule change on its Web site, which date will be at least 30 days after 
the date of filing.
2. Statutory Basis
    FINRA believes that its proposal is consistent with the provisions 
of Section 15A(b)(6) of the Act,\9\ which requires, among other things, 
that FINRA rules 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 in the public interest and

[[Page 50426]]

appropriate for the maintenance of fair and orderly markets because it 
will provide members another mechanism to report the types of trades 
described above with the necessary regulatory information.
---------------------------------------------------------------------------

    \9\ 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

    No written comments were either solicited or received.

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

    The proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \10\ and Rule 19b-(f)(6) thereunder,\11 \because 
the foregoing proposed rule 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 the public interest. FINRA believes that the proposed rule change 
is appropriately designated as a ``non-controversial'' rule change 
because the proposal is substantially similar to the trade reporting 
requirements for the other TRFs.\12\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). Rule 19b-4(f)(6) also requires the 
self-regulatory organization to give the Commission 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 the five-day pre-filing requirement.
    \12\ See, e.g., NASD Rules 4632 and 6130 (relating to the NASD/
Nasdaq TRF), 4632D and 6130D (relating to the NASD/BSE TRF) and 
4632E and 613E (relating to the NASD/NYSE TRF).
---------------------------------------------------------------------------

    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.\13\
---------------------------------------------------------------------------

    \13\ See 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

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-2007-003 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-2007-003. 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 am and 3 pm. Copies of the 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-2007-003 and should be 
submitted on or before September 21, 2007.
    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).

Nancy M. Morris,
Secretary.
 [FR Doc. E7-17271 Filed 8-30-07; 8:45 am]

BILLING CODE 8010-01-P