Document ID: SEC-2007-1015-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2007-07-27T04:00Z

[Federal Register: July 27, 2007 (Volume 72, Number 144)]
[Notices]               
[Page 41375-41377]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27jy07-93]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56108; File No. SR-NASD-2007-045]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Extending the Portfolio Margin Pilot Program

July 19, 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 July 2, 2007, the 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, II, and III below, which Items have 
been substantially prepared by NASD. NASD has designated the proposed 
rule change as constituting 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 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.
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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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD proposes to extend through July 31, 2008 the portfolio margin 
pilot program set forth in Rule 2520(g). The portfolio margin pilot 
program permits members to margin certain products according to a 
prescribed portfolio margin methodology and is set to expire on July 
31, 2007. There is no change to the rule text with this proposed rule 
change. The text of the proposed rule change is available at NASD, the 
Commission's Public Reference Room, and http://www.nasd.com.

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

[[Page 41376]]

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 SR-NASD-2007-013 for immediate 
effectiveness to establish a portfolio margin pilot program that 
permits member firms to elect to margin certain products according to a 
prescribed portfolio margin methodology.\5\ The portfolio margin pilot 
program is substantially similar to margin rule amendments by the New 
York Stock Exchange (``NYSE'') and the Chicago Board Options Exchange 
(``CBOE''), which were approved by the Commission.\6\ Consistent with 
the amended NYSE and CBOE portfolio margin programs, NASD's pilot, as 
proposed in SR-NASD-2007-013, started on April 2, 2007 and ends on July 
31, 2007.
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    \5\ See Exchange Act Release No. 55471 (March 14, 2007), 72 FR 
13149 (March 20, 2007) (Notice of Filing and Immediate Effectiveness 
of SR-NASD-2007-013).
    \6\ 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).
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    NASD proposes to extend the operation of the pilot for an 
additional one-year period to July 31, 2008. NASD believes that 
extending the pilot for twelve months is warranted in that time is 
needed to assess the operation and utility of the program, especially 
in light of the fact that the rules establishing the pilot, effective 
April 2, 2007, made equities, equity options, narrow-based index 
options, unlisted derivatives and security futures eligible for 
portfolio margining. An extension will enable NASD to determine whether 
the program better aligns margin requirements with the actual risk of 
hedged products, thereby potentially alleviating excess margin calls 
and potentially reducing the risk of forced liquidations of positions 
in customer accounts. For these reasons, NASD requests that the 
Commission extend the pilot program until July 31, 2008.
    NASD has filed the proposed rule change for immediate 
effectiveness.\7\
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    \7\ The operative date of the proposed rule change will be 
August 1, 2007.
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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 a one-year extension will enable 
NASD to evaluate the operation and utility of the portfolio margin 
pilot program to determine whether the program better aligns the margin 
requirements with actual risk.
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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

    Because the foregoing 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 prior 
to 30 days after the date of filing, or such shorter time as the 
Commission may designate, it has become effective pursuant to section 
19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    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.

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-2007-045 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-2007-045. 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 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-2007-045 and should be 
submitted on or before August 17, 2007.

[[Page 41377]]

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-14504 Filed 7-26-07; 8:45 am]

BILLING CODE 8010-01-P