Document ID: SEC-2007-0470-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2007-03-29T04:00Z

[Federal Register: March 29, 2007 (Volume 72, Number 60)]
[Notices]               
[Page 14841-14842]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29mr07-128]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55518; File No. SR-NASD-2007-024]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Portfolio Margin

March 23, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on March 20, 2007, the 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 prepared by 
NASD. NASD has filed the proposed rule as a ``non-controversial'' rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders it effective upon filing with the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is proposing to correct a typographical error in NASD Rule 
2520 (Margin Requirements). In particular, the proposed rule change 
would amend NASD Rule 2520 to re-label a subparagraph that was 
incorrectly identified as part of a recent rule filing. Below is the 
text of the proposed rule change.\5\ Proposed new language is in 
italics; proposed deletions are in [brackets].
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    \5\ The underlying rule text used in this proposed rule change 
is based on NASD Rule 2520, as amended by SR-NASD-2007-013, which 
will be implemented on April 2, 2007. See Exchange Act Release No. 
55471 (March 14, 2007), 72 FR 13149 (March 20, 2007) (Notice of 
filing and immediate effectiveness of File No. SR-NASD-2007-013).
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* * * * *
2520. Margin Requirements
    (a) through (f) No Change.
    (g) Portfolio Margin.
    As an alternative to the ``strategy-based'' margin requirements set 
forth in paragraphs (a) through (f) of this Rule, members may elect to 
apply the portfolio margin requirements set forth in this paragraph (g) 
to all margin equity securities,\1\ listed options, security futures 
products (as defined in Section 3(a)(56) of the Exchange Act), unlisted 
derivatives, warrants, index warrants and related instruments, provided 
that the requirements of paragraph (g)(6)(B)(i) of this Rule are met.
    In addition, a member, provided that it is a Futures Commission 
Merchant (``FCM'') and is either a clearing member of a futures 
clearing organization or has an affiliate that is a clearing member of 
a futures clearing organization, is permitted under this paragraph (g) 
to combine an eligible participant's related instruments as defined in 
paragraph (g)(2)(D), with listed index options, unlisted derivatives, 
options on exchange traded funds (``ETF''), index warrants and 
underlying instruments and compute a margin requirement for such 
combined products on a portfolio margin basis.
    The portfolio margin provisions of this Rule shall not apply to 
Individual Retirement Accounts (``IRAs'').
    (1) through (5) No Change.
    (6) Establishing Account and Eligible Positions.l
    (A) No Change.
    (B) Eligible Products.
    (i) For eligible participants as described in paragraphs (g)(4)(A) 
through (g)(4)(C), a transaction in, or transfer of, an eligible 
product may be effected in the portfolio margin account. Eligible 
products under this paragraph (g) consist of:
    (a) through (e) No Change.
    [(d)](f) a related instrument as defined in paragraph (g)(2)(D).
    (7) through (15) No Change.

    \1\For purposes of this paragraph (g) of the Rule, the term 
``margin equity security'' utilizes the definition at Section 220.2 
of Regulation T of the Board of Governors of the Federal Reserve 
System.

* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NASD 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. NASD 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
    On February 12, 2007, NASD filed with the Commission for immediate 
effectiveness a proposed rule change to amend Rule 2520 (Margin 
Requirements) to establish a portfolio margin pilot program.\6\ The 
Commission published notice of the proposed rule change in the Federal 
Register on March 20, 2007.\7\ The proposed rule change, among other 
things, added a new paragraph (g)(6)(B)(i) that specifies in separate 
subparagraphs a list of the eligible products for the portfolio margin 
pilot program. This list of eligible products in paragraph (g)(6)(B)(i) 
inadvertently identifies two provisions as subparagraph (d). NASD is 
filing this proposed rule change to re-label the last subparagraph (d) 
as subparagraph (f).
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    \6\ The portfolio margin pilot program is substantially similar 
to recent margin rule amendments by the New York Stock Exchange 
(``NYSE'') and the Chicago Board Options Exchange (``CBOE''), which 
were approved by the Commission. See Exchange Act Release No. 54918 
(December 12, 2006), 71 FR 75790 (December 18, 2006) (SR-NYSE-2006-
13, relating to further amendments to the NYSE's portfolio margin 
pilot program); Exchange Act Release No. 54125 (July 11, 2006), 71 
FR 40766 (July 18, 2006) (SR-NYSE-2005-93, relating to amendments to 
the NYSE's portfolio margin pilot program); Exchange Act Release No. 
52031 (July 14, 2005) 70 FR 42130 (July 21, 2005) (SR-NYSE-2002-19, 
relating to the NYSE's original portfolio margin pilot). See also 
Exchange Act Release No. 54919 (December 12, 2006), 71 FR 75781 
(December 18, 2006) (SR-CBOE-2006-014, relating to amendments to the 
CBOE's portfolio margin pilot); Exchange Act Release No. 52032 (July 
14, 2005) 70 FR 42118 (July 21, 2005) (SR-CBOE-2002-03, relating to 
the CBOE's original portfolio margin pilot).
    \7\ See Exchange Act Release No. 55471 (March 14, 2007), 72 FR 
13149 (March 20, 2007) (Notice of filing and immediate effectiveness 
of File No. SR-NASD-2007-013).
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    NASD has filed the proposed rule change for immediate 
effectiveness. As noted above, the proposed rule change is part of a 
pilot program that would

[[Page 14842]]

begin on April 2, 2007 and end on July 31, 2007, unless the SEC 
approves an extension of the pilot or adoption of the program on a 
permanent basis.
2. Statutory Basis
    NASD believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\8\ which requires, among 
other things, that NASD 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. NASD believes that this technical change is consistent 
with the protection of investors and the public interest in that it 
will avoid any confusion when reading the provisions of Rule 
2520(g)(6)(B)(i).
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    \8\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD 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

    The foregoing proposed rule change is subject to Section 
19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(6) thereunder \10\ 
because the proposal: (i) Does not significantly affect the protection 
of investors or the public interest; (ii) does not impose any 
significant burden on competition; and (iii) does not become operative 
prior to 30 days after the date of filing or such shorter time as the 
Commission may designate. At any time within 60 days of the filing of 
such 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
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    NASD has asked the Commission to waive the five-day pre-filing 
notice requirement and the 30-day operative delay. The Commission 
believes such waivers are consistent with the protection of investors 
and the public interest because they would allow the technical 
corrections in the proposed rule change to be implemented on April 2, 
2007, when the NASD portfolio margin pilot program begins, pursuant to 
SR-NASD-2007-013.\11\ For this reason, the Commission designates the 
proposal to be operative upon filing with the Commission.\12\
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    \11\ For purposes only of waiving the 30-day pre-operative 
period, the Commission has considered the proposed rule's impact on 
efficiency, competition and capital formation. 15 U.S.C. 78c(f).
    \12\ See supra note 7.
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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-NASD-2007-024 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-NASD-2007-024. 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. Copies of such 
filing also will be available for inspection and copying at the 
principal office of 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 
SR-NASD-2007-024 and should be submitted on or before April 19, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-5814 Filed 3-28-07; 8:45 am]

BILLING CODE 8010-01-P