Document ID: SEC-2008-1430-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2008-10-15T04:00Z

[Federal Register: October 15, 2008 (Volume 73, Number 200)]
[Notices]               
[Page 61178-61180]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15oc08-149]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58754; File No. SR-FINRA-2008-049]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change Relating to UPC Advisory on Trading Halts in OTC 
Equity Securities

October 8, 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 October 7, 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 (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by FINRA. FINRA has 
designated the proposed rule change as constituting a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule under Section 
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(1) 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(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is filing a Uniform Practice Code (UPC) Advisory that 
provides

[[Page 61179]]

notice that FINRA will halt trading in OTC Equity Securities under 
FINRA Rule 6460(a)(3) (formerly NASD Rule 6660(a)(3)) if there is a 
market-wide halt in trading in NMS stocks.\5\
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    \5\ On September 25, 2008, the SEC approved proposed rule change 
SR-FINRA-2008-021, in which FINRA proposed, among other things, to 
adopt the NASD Marketplace Rules (the NASD Rule 4000 through 7000 
Series) as the FINRA Rule 6000 through 7000 Series in the 
Consolidated FINRA Rulebook. See Securities Exchange Act Release No. 
58643 (September 25, 2008), 73 FR 57174 (October 1, 2008) (Order 
Approving SR-FINRA-2008-021; SR-FINRA-2008-022; SR-FINRA-2008-026; 
SR-FINRA-2008-028 and SR-FINRA-2008-029). As part of that proposed 
rule change, FINRA adopted the provisions of NASD Rule 6660 as new 
FINRA Rule 6460 relating to trading and quotation halts in OTC 
Equity Securities.
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    The text of the proposed UPC Advisory is attached as Exhibit 1. 
There are no changes to the text of FINRA rules.

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
    National securities exchanges generally have circuit breaker rules 
whereby the trading in all exchange-listed securities is halted based 
on a one-day decline of 10%, 20% and 30% of the Dow Jones Industrial 
Average (``DJIA''), with the percentage value based on the average 
closing value of the DJIA for the month prior to the beginning of the 
quarter, or have other general authority to halt trading in response to 
similar extraordinary market conditions.\6\ Unlike the exchanges, with 
respect to OTC Equity Securities (as that term is defined in the FINRA 
Rule 6400 Series (formerly NASD Rule 6600 Series)), FINRA does not have 
an express circuit breaker rule but relies on its authority under FINRA 
Rule 6460(a)(3) (formerly NASD Rule 6660(a)(3)), which provides that 
FINRA may halt quoting and trading in OTC equity securities if FINRA 
determines that an extraordinary event has occurred or is ongoing that 
has had a material effect on the market for the OTC Equity Security or 
has caused or has the potential to cause major disruption to the 
marketplace and/or significant uncertainty in the settlement and 
clearance process. FINRA considers a market-wide halt in the trading of 
exchange-listed securities to be an extraordinary event under Rule 
6460(a)(3) and has therefore published a UPC Advisory (attached as 
Exhibit 1) to give notice to members and other interested parties that 
FINRA will halt quoting and trading in OTC Equity Securities under 
these circumstances.
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    \6\ See, e.g., NYSE Rule 80B, NYSE Arca Equities Rule 7.12 and 
NASDAQ Exchange Rule 4121.
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    FINRA has filed the proposed rule change for immediate 
effectiveness and it is operative on the date of filing.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\7\ 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 
consistent with the circuit breaker rules of other SROs and will 
further the goal of investor protection by providing a coordinated 
means to address potentially destabilizing market volatility.
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    \7\ 15 U.S.C. 78o-3(b)(6).
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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

    The proposed rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) of the Act \8\ and paragraph (f)(1) of Rule 19b-4 
thereunder,\9\ in that the proposed rule change is a stated policy, 
practice or interpretation with respect to the meaning, administration 
or enforcement of an existing rule. 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.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(1).
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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-FINRA-2008-049 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-FINRA-2008-049. 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, 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 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-

[[Page 61180]]

2008-049 and should be submitted on or before November 5, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.

Exhibit 1

Attn: Trading and Market Making/Legal and Compliance/Operations/Systems

Uniform Practice Advisory (UPC  XXX-2008) October 6, 2008
Exchange Circuit Breaker Declaration--FINRA OTC Equity Market Trigger
FINRA Rule 6460 (NASD Rule 6660)
    Financial Industry Regulatory Authority, Inc. (FINRA) members are 
hereby provided notice that upon FINRA's receipt of actual notification 
(via the NMS consolidated data plans or otherwise) that a market-wide 
trading halt has been declared for NMS stocks, due to a percentage-
based circuit breaker having been triggered, FINRA will exercise its 
authority under FINRA Rule 6460(a)(3) (NASD Rule 6660(a)(3)) to halt 
quoting and trading activity in the market for OTC Equity securities 
(as defined in the FINRA Rule 6400 Series (NASD Rule 6600 Series)).\11\ 
Questions regarding this notice should be directed to: FINRA 
Operations, 866-776-0800.
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    \11\ On September 25, 2008, the SEC approved proposed rule 
change SR-FINRA-2008-021, in which FINRA proposed, among other 
things, to adopt the NASD Marketplace Rules (the NASD Rule 4000 
through 7000 Series) as the FINRA Rule 6000 through 7000 Series in 
the Consolidated FINRA Rulebook. See Securities Exchange Act Release 
No. 58643 (September 25, 2008), 73 FR 57174 (October 1, 2008) (Order 
Approving SR-FINRA-2008-021; SR-FINRA-2008-022; SR-FINRA-2008-026; 
SR-FINRA-2008-028 and SR-FINRA-2008-029). As part of that proposed 
rule change, FINRA adopted the provisions of NASD Rule 6660 as new 
FINRA Rule 6460 relating to trading and quotation halts in OTC 
Equity Securities.

[FR Doc. E8-24377 Filed 10-14-08; 8:45 am]

BILLING CODE 8011-01-P