[Federal Register Volume 59, Number 248 (Wednesday, December 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31657]
[Federal Register: December 28, 1994]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 200, 240, and 249
[Release No. 34-35123; File No. S7-17-94]
RIN: 3235-AG15
Proposed Rule Changes of Self Regulatory Organizations; Annual
Filing of Amendments to Registration Statements of National Securities
Exchanges, Securities Associations, and Reports of the Municipal
Securities Rulemaking Board
AGENCY: Securities and Exchange Commission.
ACTION: Final rules.
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SUMMARY: The Securities and Exchange Commission (``Commission'') is
adopting amendments to Rule 19b-4 and Form 19b-4 under the Securities
Exchange Act of 1934 to expand the scope of proposed rule changes filed
by self-regulatory organizations that may become effective immediately.
The Commission also is amending its rules to delegate to the Director
of the Division of Market Regulation certain related functions. The
amendments implement recommendations contained in the Market 2000
report and are designed to expedite and streamline the process by which
proposed rule changes of self-regulatory organizations are filed and
become effective. In addition, the Commission is streamlining and
conforming the requirements for national securities exchanges and
securities associations to file annual amendments to their registration
statements, and for the Municipal Securities Rulemaking Board to file
annual reports.
EFFECTIVE DATE: January 27, 1995.
FOR FURTHER INFORMATION CONTACT: (prior to the effective date)
Catherine McGuire, Chief Counsel, or Andrew S. Margolin, Senior
Counsel, Office of Chief Counsel, at (202) 942-0073; (after the
effective date) for exchange rules, Sharon Lawson, Assistant Director,
at (202) 942-0182, or Ivette Lopez, Senior Special Counsel, at (202)
942-0765; for National Association of Securities Dealers and Municipal
Securities Rulemaking Board rules, Katherine A. England, Assistant
Director, at (202) 942-0154; for clearing agency rules, Jerry
Carpenter, Assistant Director, at (202) 942-4187, Office of Market
Supervision, Division of Market Regulation, Securities and Exchange
Commission, 450 Fifth Street, NW., Mail Stop 5-1, Washington, DC 20549.
SUPPLEMENTARY INFORMATION:
I. Introduction
On June 1, 1994, the Commission proposed for public comment
amendments to Rule 19b-41 and Form 19b-42 under the
Securities Exchange Act of 19343 (``Exchange Act'' or ``Act''),
the rule and form applicable to the process by which self-regulatory
organizations (``SROs'') file proposed rule changes with the
Commission.4 The proposal was intended to expedite the rule filing
process by expanding the categories of proposed rule changes that may
become effective upon filing pursuant to Section 19(b)(3)(A)5 of
the Act to include certain systems changes and other noncontroversial
filings. The Commission also proposed amendments to Rules 6a-2,6
15Aj-1,7 17a-21,8 and Form X-15AJ-29 under the Act, to
streamline and conform the annual filing requirements of amendments to
registration statements of national securities exchanges and securities
associations, and annual reports of the Municipal Securities Rulemaking
Board (``MSRB'').
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\1\17 CFR 240.19b-4.
\2\17 CFR 249.819.
\3\15 U.S.C. 78a, et seq.
\4\Securities Exchange Act Release No. 34140 (June 1, 1994), 59
FR 29393 (``Proposing Release'').
\5\15 U.S.C. 78s(b)(3)(A).
\6\17 CFR 240.6a-2.
\7\17 CFR 240.15Aj-1.
\8\17 CFR 240.17a-21.
\9\17 CFR 249.803.
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The proposals implement recommendations contained in the Division
of Market Regulation's (``Division'') Market 2000 report.10 The
report recommended that the rule filing process be expedited for
routine procedural and administrative modifications to existing order-
entry and trading systems. The Division also agreed to consider other
types of SRO proposals that could be subject to an expedited review
process.
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\1\0Division of Market Regulation, Market 2000: An Examination
of Current Equity Market Developments (January, 1994).
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The Commission received nine comment letters in response to its
request for comments.11 Commenters expressed general support for
these proposals, and also suggested other ways to improve the SRO rule
filing process. The Commission has determined to adopt the amendments
substantially as proposed with some modifications designed to address
the comments received.12 The Commission also is providing further
clarification on the application of amended Rule 19b-4.
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\1\1See Letters to Jonathan G. Katz, Secretary, Securities and
Exchange Commission, from: James E. Buck, Senior Vice President and
Secretary, New York Stock Exchange (``NYSE''), dated August 12,
1994; Richard G. Ketchum, Chief Operating Officer and Executive Vice
President, National Association of Securities Dealers (``NASD''),
dated August 16, 1994; James F. Duffy, Executive Vice President and
General Counsel, American Stock Exchange (``Amex''), dated August
18, 1994; Michael L. Myers, Schiff Hardin & Waite [on behalf of the
Chicago Board Options Exchange (``CBOE'') and the Options Clearing
Corporation (``OCC'')], dated August 12, 1994; J. Craig Long,
Secretary, Chicago Stock Exchange (``CHX''), dated August 8, 1994;
Larry R. Shotwell, Executive Vice President, Pacific Stock Exchange
(``PSE''), dated August 12, 1994; David C. Clapp, Chairman,
Municipal Securities Rulemaking Board (``MSRB''), dated August 3,
1994; William W. Uchimoto, First Vice President and General Counsel,
Philadelphia Stock Exchange (``Phlx''), dated August 19, 1994; and
John I. Fitzgerald, Executive Vice President, Boston Stock Exchange
(``BSE''), dated August 8, 1994. The comment letters and a summary
of comments are contained in Public File No. S7-17-94.
\1\2These amendments may affect clearing agencies for which the
Commission is not the appropriate regulatory agency as defined in
Exchange Act Sec. 3(a)(34), 15 U.S.C. 78c(a)(34). Therefore, in
accordance with Exchange Act Sec. 17A(d)(3)(A)(i), 15 U.S.C. 78q-
1(d)(3)(A)(i), at least 15 days before this announcement, the
Commission consulted and requested the views of the Board of
Governors of the Federal Reserve System.
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II. Amendments to Rule 19b-4
Under Section 19(b) of the Act, an SRO is required to file with the
Commission its proposed rule changes.13 Once a proposed rule
change is filed, the Commission is required to publish notice of it and
provide an opportunity for public comment. The proposed rule change may
not take effect unless approved by the Commission or unless the rule
change is within the class of rule changes effective upon filing
pursuant to Section 19(b)(3)(A).14
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\1\315 U.S.C. 78s(b)
\1\4See Proposing Release for a more complete discussion of this
process.
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Under Section 19(b)(3)(A) of the Act and Rule 19b-4(e) thereunder,
a proposed rule change may take effect upon filing without the notice
and approval procedures required by Section 19(b)(2) if the proposed
rule change comes within prescribed statutory categories,15
including matters which the Commission may, consistent with the public
interest and the purposes of this subsection, specify by rule.
Accordingly, the Commission is amending Rule 19b-4 to add two new
categories of proposed rule changes that can become effective in this
manner: (1) Routine procedural and administrative modifications to
existing order-entry and trading systems (the ``existing systems
category''); and (2) certain other noncontroversial filings (the
``noncontroversial category'').16 The Commission believes that
these amendments are consistent with the general principles of the
Exchange Act applicable to the approval of SRO rule changes that ensure
that meaningful public comment is reflected where necessary. All rule
changes that become effective under Section 19(b)(3)(A) will continue
to be subject to abrogation by the Commission within 60 days of the
filing.17
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\1\5These include rule changes that (1) Constitute a stated
policy, practice, or interpretation with respect to the meaning,
administration, or enforcement of an existing rule of the SRO, (2)
establish or change a due, fee, or other charge imposed by the SRO,
or (3) that are concerned solely with the administration of the SRO.
15 U.S.C. 78s(b)(3)(A).
\1\6These categories will be established by amending Rule 19b-4
to add paragraph (e)(5) for the systems category and paragraph
(e)(6) for the noncontroversial category, and by making conforming
changes to Form 19b-4.
\1\715 U.S.C. 78s(b)(3)(C).
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A. Systems Changes
In the Proposing Release, the Commission proposed to allow SRO rule
changes dealing with routine procedural and administrative
modifications to existing order-entry and trading systems to become
effective upon filing pursuant to Section 19(b)(3)(A) of the Act.
Historically, it has been required that these modifications be filed
under Section 19(b)(2).18 The proposed amendments limit the scope
of the existing systems category to those systems changes that: (1) Do
not significantly affect the protection of investors or the public
interest; (2) do not impose any significant burden on competition; and
(3) do not have the effect of limiting the access to or availability of
the system.
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\1\8See, e.g., Letter from Richard T. Chase, Assistant Director,
SEC, to Frank Wilson, Executive Vice President, NASD (February 4,
1983).
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Commenters supported this proposal because it would address
concerns that the filing process with respect to these types of rule
changes can be too lengthy, and hampers the ability of SROs to provide
prompt, flexible, and innovative systems changes. Several commenters,
however, requested further clarification of when a systems change
requires a filing, and whether such filings would be eligible to become
effective upon filing under the existing systems category.
1. Systems Changes that Require Rule Change Filings
The NASD commented that certain changes related to order-entry and
trading systems should not be considered proposed rule changes at all
and should be exempt from the filing process. The NASD cited changes
involving the format and appearance of screens, keystroke commands,
underlying hardware and software changes, and the user manuals and
technical guides to system operation. The NASD stated that these
filings rarely would pose significant concerns in the areas of investor
protection, public interest, or fair competition.
While changes to the format and appearance of screens, or changes
involving the underlying hardware and software may not need to be filed
pursuant to Section 19(b)(2) in many instances, the Commission cannot
state as a general matter that these changes are never required to be
filed. For example, if an SRO decided to alter the format and
appearance of a system providing quotation information by excluding the
market maker or market specialist identifier, thus making it virtually
impossible for a system user to determine the origination of a quote,
the SRO would then be required to file a proposed rule change with the
Commission. The Exchange Act requires SROs to have rules designed,
among other things, to remove impediments to and perfect the mechanism
of a free and open market and a national market system.19 Thus,
any change to a system providing quotation information that would
affect the maintenance of a free and open market or a national market
system would be required to be filed with the Commission.
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\1\915 U.S.C. 78f(b)(5) and 78o-3(b)(6).
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Similarly, changes to keystroke commands would generally not
require a filing. If such a change, however, would have the effect of
prohibiting entry of certain types of orders, such as a series of
keystrokes so cumbersome that it has the effect of prohibiting the
entry of orders priced outside the current inside market, that change
would require a filing pursuant to Section 19(b)(2).20 While
software or hardware changes generally do not require a filing pursuant
to Section 19(b)(2), the Commission has suggested that significant
hardware and software changes be reported to the Commission on an
annual and an as-needed basis, as stated in its most recent Automation
Review Policy.21
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\2\0In fact, the Commission recently was presented with a
situation which raised this very issue and demonstrated the need for
filing pursuant to Section 19(b)(2). On October 25, 1993, the NASD
filed with the Commission a proposed rule change to modify the
SelectNet service by prohibiting entry of orders in SelectNet priced
outside the inside Nasdaq market. Securities Exchange Act Release
No. 33101 (Oct. 25, 1993), 58 FR 58363 (File No. SR-NASD-93-60). The
NASD filed that rule change pursuant to Section 19(b)(3)(A) of the
Act which became effective immediately. On October 29, 1993,
pursuant to Section 19(b)(3)(C) of the Act, the Commission abrogated
the rule change on the basis that it should have been filed pursuant
to Section 19(b)(2) and thus, subject to notice and comment.
Securities Exchange Act Release No. 33116 (Oct. 29, 1993), 58 FR
58883. On November 1, 1993, the NASD refiled with the Commission the
proposed rule change pursuant to Section 19(b)(2) of the Act.
Securities Exchange Act Release No. 33141 (Nov. 3, 1993), 58 FR
59504 (File No. SR-NASD-93-61). Due to concerns about whether the
NASD's proposal was consistent with the Act, the Commission
instituted proceedings pursuant to Section 19(b)(2)(B) of the Act to
determine whether the proposed rule change should be disapproved.
Securities Exchange Act Release No. 34000 (May 3, 1994), 59 FR
23909. Subsequently, the NASD modified the SelectNet keystroke
procedures for entering and accepting orders outside the inside
Nasdaq market. The modification provided a warning to SelectNet
participants that the order is priced outside the inside market but
allows participants to override the warning. Because this
modification neither significantly altered SelectNet nor denied
access to SelectNet, the change was not considered a proposed rule
change and thus did not require filing with the Commission. As a
result, the NASD withdrew its proposed rule change and the
Commission terminated the proceedings to determine whether to
disapprove the proposal. Securities Exchange Act Release No. 34486
(Aug. 4, 1994), 59 FR 40933.
\2\1Securities Exchange Act Release No. 29185 (May 9, 1991), 56
FR 22490.
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User manuals and technical guides for a particular system, as a
general matter, need not be filed with the Commission. It has been the
Commission's experience, however, that at times, a clear understanding
of how the system functions may be achieved only by reviewing the rules
of the SRO in conjunction with the user manual or technical guide. The
Commission believes that it is more appropriate to have the relevant
information in the SRO's rules so that it may be available to anyone
seeking an understanding of the system's operation.22 It is the
SRO's responsibility to make the initial determination of whether an
action an SRO is contemplating will require a filing, including whether
to file user manuals and technical guides. Whether any particular guide
needs to be filed must be determined on a case by case basis.23
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\2\2The SRO's rules should indicate, for example, the types and
size of orders, and with specificity, the manner in which orders
will be processed in the system. Specifically, with respect to a
system such as SelectNet, it is important to know how the different
types of orders are displayed and to whom they are displayed. See
Letter from David Humphreville and Caroline B. Austin, Co-Chairs,
National Specialist Association to Jonathan G. Katz, Secretary, SEC,
dated November 6, 1992 (commenting on File No. SR-NASD-92-16).
Information explaining the combination of keystrokes that must be
used to accept an order may be more appropriate for a user manual or
technical guide.
\2\3If an SRO has failed to explain clearly in its rules how a
particular system functions, including who has access to the system,
it should consider submitting a proposed rule change comprising the
relevant information contained in the guide or manual.
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2. Scope of Filings Eligible for the Existing Systems Category
In the Proposing Release, the Commission cited examples of the type
of proposed rule change that would be within the existing systems
category. For example, a proposed rule change that would increase
marginally the maximum number of shares per order that could be
executed through an SRO's small order routing and execution system, or
a proposed rule change that would expand the number of series or
classes eligible for options routing and execution systems generally
could be filed pursuant to Section 19(b)(3)(A).
In addition, the Commission believes that the following recent
filings also exemplify the type that would qualify for the existing
systems category: a rule change requiring the use of a special
indicator for average-priced trade reports,24 and one requiring
OTC Bulletin Board (``OTCBB'') market makers to append a fifth
character to their market maker identifier as a geographic indicator
when trading away from primary offices.25
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\2\4File No. SR-NASD-93-20.
\2\5File No. SR-NASD-93-74.
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The NASD suggested that the term ``trading system'' should be
clarified to include automated services that support trading, trade
reporting, and clearance and settlement, such as the OTCBB and the
Automated Confirmation Transaction service (``ACT''). The NASD
recommended that changes to these systems should be eligible under
either the existing systems category, or the noncontroversial category
discussed below.
The Amex requested that the Commission make clear that changes to
automatic equity order execution systems that could interfere with
providing best execution would be precluded from filing under Section
19(b)(3)(A). The Amex also requested that the Commission not limit the
availability of the existing systems category to only marginal
increases in the number of shares per order that can be entered and
executed through a small order routing and execution system, as stated
in the Proposing Release, but also include significant increases in
certain circumstances.
While the Commission generally believes that it may be reasonable
to interpret broadly the term ``trading system,'' to include related
automated services such as the OTCBB or ACT, such that changes to those
services could be eligible for filing under the existing systems
category, the Commission also believes, for example, that a proposal to
expand the category of eligible securities in connection with a system
to include foreign securities would raise investor protection and
competitive concerns, and would thus be subject to review pursuant to
Section 19(b)(2).
The Commission recognizes, as noted by the Amex, that a proposed
rule change that interferes with best execution obligations would
significantly affect the protection of investors and thus would not
satisfy the conditions for expedited treatment set forth in the rule.
The Commission also believes that a proposed rule change that
substantially increases the number of shares per order routed or
executed through a small order execution system may in some
circumstances be eligible for expedited treatment. Such a proposed rule
change, however, generally would not be eligible to become effective
upon filing under the existing systems category because a change in the
order size of substantial magnitude would not qualify as a modification
of an existing system, but in effect establishes a new system. Thus, it
generally will be more appropriate to file significant increases in
order size under the noncontroversial category discussed below.
The Commission is adopting the amendments concerning existing
systems changes as originally proposed. The Commission believes that,
because these types of proposed rule changes deal with operational
details of existing systems and are subject to certain limitations in
the rule, they do not require the full notice and review procedures of
Section 19(b)(2). The amendments bring the filing procedures for this
type of proposed rule change in line with procedures that have been in
effect for clearing agencies since 1980.26
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\2\6A proposed rule change of a registered clearing agency can
become effective upon filing pursuant to Rule 19b-4 if it effects a
change in an existing service that (1) does not adversely affect the
safeguarding of securities or funds in the custody or control of the
clearing agency or for which it is responsible and (2) does not
significantly affect the respective rights or obligations of the
clearing agency or persons using the service. See Securities
Exchange Act Release No. 17258 (October 30, 1980), 45 FR 73906.
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B. Noncontroversial Filings
As proposed, the amendments to Rule 19b-4 also would expand the
scope of proposed rule changes that may become effective upon filing
under Section 19(b)(3)(A) to include certain noncontroversial filings.
For these filings, SROs would be required to provide written notice to
the Commission five business days prior to the filing.27 This
notice would provide Commission staff an opportunity to discuss with
the SRO whether there exists an adequate basis upon which the proposed
rule change may properly qualify under Section 19(b)(3)(A), and could
elicit guidance from Commission staff to help the SRO identify those
aspects of a proposed rule change that the Commission deems
important.28 Proposed rule changes in the noncontroversial
category, by their terms, would become operative 30 days after the date
of publication of the notice, or such shorter time as the Commission
may designate.
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\2\7As stated in the Proposing Release, the Commission expects
that such notices will be informal and often transmitted by
facsimile. The notice should be directed to the appropriate Division
staff responsible for reviewing that SRO's filings of proposed rule
changes. The Commission intends to place this notice in a public
file. See Exchange Act Sec. 23(a)(3), 15 U.S.C. 78w(a)(3).
For every clearing agency for which the Commission is not the
appropriate regulatory agency, the notice also must be filed with
the appropriate regulatory agency for the clearing agency as
required by Exchange Act Sec. 17(c)(1), 15 U.S.C. 78q(c)(1).
Consistent with the requirements of that section, the Commission
also would expect the MSRB to file such notices with each agency
enumerated in Exchange Act Sec. 3(a)(34)(A), 15 U.S.C.
78c(a)(34)(A).
\2\8This also should help the SRO articulate in its subsequent
filing the purpose and effects of the proposed rule change, which in
turn should further facilitate and expedite the filing process.
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The proposal of the noncontroversial category elicited significant
comment. The comments focused on the timing of the effectiveness of
these noncontroversial filings, and the scope of proposed rule changes
that may be filed under this category. Commenters also voiced concerns
relating to the publication of notices of proposed rule changes
generally.
1. Timing of Effectiveness
Commenters indicated that the 30-day delayed operational date was
too lengthy for noncontroversial rule filings and that, in any case,
the operational date was not predictable.29 Commenters offered a
variety of suggestions about how to address this issue. While some
suggested that the period be shortened,30 others suggested
eliminating the period altogether or granting authority to delay the
operation of the rule only in specific circumstances.31 Several
recommended that the 30-day period run from the date of the filing
rather than the date of publication.32 The Amex requested that the
Commission clarify procedures applicable to the filing of amendments to
proposed rule changes under the noncontroversial category, and
requested that there be an explicit mechanism for requesting that the
30-day period be shortened. The Amex also recommended that the five-day
period for submitting a pre-filing notice be a maximum, and not a
minimum period, so as not to preclude submission of the subsequent
filing less than five days later, in the event that the Commission
determines in a shorter time that the filing is appropriately filed
under this category.
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\2\9See, e.g., Letter from NYSE.
\3\0See, e.g., Letter from Amex.
\3\1Letter from NYSE.
\3\2Letters from CBOE, CHX, Phlx.
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Related to the timing of effectiveness is the matter of publishing
notices of proposed rule changes. Several commenters were critical of
the length of time between the filing of a proposed rule change and its
publication in the Federal Register. The CBOE, for example, argued that
in some cases the publication of the notice has been inordinately
delayed. The Phlx stated that the delay results from a lengthy pre-
publication review by the Commission. The NYSE and the NASD suggested
that the Commission adopt an internal guideline on publishing notices
to address this perceived problem.
The Commission believes that a 30-day delayed operational date for
noncontroversial filings is necessary and appropriate. If, as a result
of either subsequent Commission review or public comment, it is
determined that a proposed rule change was not properly filed as within
the noncontroversial category, the 30-day period would allow the
Commission to abrogate the rule change without a significant disruption
in existing operations.
To address concerns of commenters, however, the Commission has
determined to commence the 30-day period with the filing date of the
proposed rule change, instead of the publication date as originally
proposed. This will enable SROs to implement a proposed rule change
more quickly, while preserving the opportunity for meaningful public
comment. A 30-day period triggered by the filing date provides
predictability while assuring that the filing is reviewed not only by
the staff but also by commenters.
With respect to amendments to filings in the noncontroversial
category, the Commission believes that any substantive amendment would
trigger a new 30-day period, assuming that the changes do not render
the filing ineligible for this category. The staff would, however, have
discretion to accept editorial changes without triggering a new 30-day
period. The Commission notes that this procedure was designed to
expedite those SRO filings that are inherently simple and concise, and
that would otherwise require little in the way of extended review or
analysis by the Commission. A filing requiring further substantive
amendments may indicate that it is not appropriate for the expedited
treatment afforded by the noncontroversial category.
Form 19b-4 also has been amended to state that an SRO requesting
the Commission to shorten the 30-day period should provide a statement
explaining why the Commission should do so. With respect to the five-
day pre-filing period, the Commission is amending the rule to permit
the Commission to designate a shorter period if appropriate.
As the Commission has stated in the past, its intent is to publish
all notices of proposed rule changes promptly.33 In light of
comments received, the Commission will redouble its efforts to do so in
the future. The Commission notes, however, that notices of proposed
rule changes need to be clear in order to elicit meaningful public
comment. Although a proposed rule change may be accepted as filed, the
Commission believes that it should not be published until it has
reached an adequate level of clarity regarding the issues raised by the
filing. For complex filings, this can require more extensive review.
Filings of rule changes also need to include information necessary to
enable the Commission's staff to conduct a complete review. Any filings
that fail to comply with the requirements of Form 19b-4 may be returned
to the SRO and will be deemed not to have been filed with the
Commission.
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\3\3Securities Exchange Act Release No. 17258 (October 30,
1980), 45 FR 73906.
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2. Scope of Filings Eligible for the Noncontroversial Category
Many commenters requested further clarification of the scope of
this proposal. While it would be impossible to identify with certainty
in advance every type of proposed rule change that may qualify for the
noncontroversial category, the discussion below should assist SROs in
assessing its availability.
The noncontroversial category applies only to those proposed rule
changes that are properly designated by the SRO as not significantly
affecting the protection of investors or the public interest and not
imposing any significant burden on competition. As indicated in the
Proposing Release, proposed rule changes meeting these criteria
generally are less likely to engender adverse comments or require the
degree of review attendant with more controversial filings.
In the Proposing Release, the Commission cited examples of proposed
rule changes that would be eligible for the noncontroversial category,
such as certain proposed rule changes that would add an existing rule
to an SRO's minor rule violation plan, and proposed rule changes that
permit the transmission of data to or from the SRO by computer
interface or other electronic means. The Proposing Release also made
clear, however, that for policy reasons, a proposed rule change that
would reduce public representation in the administration of the affairs
of an SRO or that would amend the procedures for arbitration or
disciplinary proceedings would not be a proper candidate to become
effective under Section 19(b)(3)(A).
In its comment letter, the NYSE stated that the scope of the
proposal for noncontroversial filings would depend on the
interpretation of the term ``significant'' as it is used in the
amendments. In requesting that the Commission provide further guidance
on the scope of this proposal, the NYSE indicated that, based on a
survey of its filings for 1993 and the first half of 1994, its staff
believed that the overwhelming majority of its rule changes would not
have been eligible for expedited treatment. The NASD and the Amex
suggested that the Commission apply an expedited approach to proposed
rule changes that ``clone'' or are virtually identical to other rule
changes filed by another SRO that already have been approved by the
Commission. The NASD also questioned the general utility of the
noncontroversial category to the extent that a competitor could
unjustifiably impede the expedited treatment of an SRO's proposed rule
change simply by filing a perfunctory adverse comment letter.
The Commission would like to make clear that although it intends to
expedite the rule filing process, it is doing so only with respect to
the universe of proposed rule changes that are not likely to engender
adverse comments or otherwise warrant the type of review required by
Section 19(b)(2) of the Act. With respect to the NYSE's survey of its
filings, the Commission staff has determined that, of 72 NYSE proposed
rule changes identified as being filed during the period surveyed by
the NYSE, at least seventeen, in retrospect, would have qualified for
expedited treatment under the noncontroversial category. These include
filings that: (1) conformed the NYSE pre-opening application to the
Intermarket Trading System by clarifying the use of a cancellation
notification sent after a pre-opening notification;34 (2) similar
to other proposals approved for the Amex and CBOE, provided for the
listing and trading of quarterly index expiration options;35 (3)
amended floor conduct and safety guidelines not dealing with procedural
rights of offender (two filings);36 (4) rescinded two NYSE rules,
Rules 391 and 392, which served little purpose in light of the
Commission's rescission of its Rule 10b-2;37 (5) extended until
January 31, 1994, off-hours trading and the matched market-on-close
pilot program;38 (6) added to the exchange's minor rule violation
plan NYSE Rule 410B, which requires members and member organizations to
report trades in exchange listed stocks not otherwise reported to the
Consolidated Tape;39 (7) related to registration and
fingerprinting of floor members and employees;40 (8) amended the
exchange's minor rule violation plan to include exchange procedures
with respect to entry and cancellation of market-at-the-close orders on
expiration days, and other rules for which determinations of violations
can be made objectively (two filings);41 (9) extended for one year
the NYSE's pilot program for position limit exemptions for certain
hedged equity and stock index option positions;42 (10) increased
insubstantially the exchange's continuing listing fees;43 (11)
extended Rule 103A relating to specialist stock reallocation;44
(12) amended NYSE Rule 321 by clarifying the term ``control'' and
substituting the word ``subsidiary'' for the word ``affiliate'' in
Rules 113 and 122;45 (13) authorized the NYSE to provide to the
Central Registration Depository information concerning pending formal
disciplinary proceedings;46 (14) for audit trail reporting
purposes, added identification codes for short sales exempt from
Commission or exchange rules;47 and (15) extended the exchange's
circuit breaker pilot program.48
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\3\4File No. SR-NYSE-93-01.
\3\5File No. SR-NYSE-93-04.
\3\6File Nos. SR-NYSE-93-14 and SR-NYSE-93-25.
\3\7File No. SR-NYSE-93-20.
\3\8File No. SR-NYSE-93-23.
\3\9File No. SR-NYSE-93-24.
\4\0File No. SR-NYSE-93-28.
\4\1File Nos. SR-NYSE-93-35 and SR-NYSE-93-38.
\4\2File No. SR-NYSE-93-42.
\4\3File No. SR-NYSE-93-46. See discussion on fee-related
filings in this section, infra.
\4\4File No. SR-NYSE-94-07.
\4\5File No. SR-NYSE-94-09.
\4\6File No. SR-NYSE-94-11.
\4\7File No. SR-NYSE-94-16.
\4\8File No. SR-NYSE-94-34.
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In addition, the staff of the Commission has identified other
filings that are representative of the types of filings that could
qualify for the noncontroversial category. These include filings that:
(1) deleted that part of Schedule D to NASD by-laws concerning
publication and dissemination of quotations to the news media, to
reflect current NASD practice;49 (2) deleted the section of NASD
by-laws regarding a local quotations program that had been phased
out;50 (3) required members to adjust certain orders when
securities are quoted ex-dividend, ex-rights, and ex-interest;51
(4) eliminated existing regulatory requirements for non-Nasdaq OTC
securities once real-time reporting of those securities had been
approved by the Commission;52 (5) extended previously approved
pilot linkages between Nasdaq and foreign exchanges;53 (6)
mandated market maker use of registered clearing agencies;54 and
(7) provided a procedure for the immediate publication of final
disciplinary sanctions.55 Moreover, it is the Commission's view
that mechanical or simple editorial changes to existing rules, such as
when a change in an SRO's rule numbering system results in incorrect
cross-references in other rules, may be filed within the
noncontroversial category.
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\4\9File No. SR-NASD-93-14.
\5\0File No. SR-NASD-93-40.
\5\1File No. SR-NASD-93-52.
\5\2File No. SR-NASD-93-68.
\5\3File Nos. SR-NASD-94-23, SR-NASD-94-25, and SR-NASD-94-30.
\5\4File No. SR-NASD-94-28.
\5\5File No. SR-NASD-94-59.
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As noted above, under Section 19(b)(3)(A)(ii) of the Act, rule
changes that establish or change a due, fee, or other charge imposed by
the SRO may become effective upon filing.56 The Commission notes
that the filing of a proposed fee applicable to members may nonetheless
raise significant regulatory issues and thus be required, consistent
with current Commission policy, to be submitted pursuant to Section
19(b)(2).57 In addition, the Commission continues to believe that,
as a matter of general policy, an SRO proposed rule change that
establishes or changes a due, fee or other charge applicable to a non-
member or non-participant must be filed under Section 19(b)(2) for full
notice and comment.58 While filings concerning fees applicable to
non-members have not been eligible to become effective upon filing
under Section 19(b)(3)(A)(ii), some such filings now may qualify for
expedited treatment under the noncontroversial category.59
---------------------------------------------------------------------------
\5\6See note 15, supra.
\5\7See, e.g., Securities Exchange Act Release No. 32377 (May
27, 1993), 58 FR 31568 (File No. SR-NYSE-93-08) (approving NYSE
proposal to grant an additional system credit to member and member
organizations for all individual and agency orders of a certain
size, except orders for the account of a non-member competing market
maker, routed through the NYSE's SuperDot system for execution);
Securities Exchange Act Release No. 27286 (September 21, 1989), 54
FR 40224 (File No. SR-NASD-88-55) (approving NASD proposal relating
to the imposition on certain member firms of an assessment on annual
gross income from transactions in U.S. Government Securities).
\5\8Securities Exchange Act Release No. 17258 (October 30,
1980), 45 FR 73906, at 73910 n.40. See, e.g., Securities Exchange
Act Release Nos. 33123 (October 29, 1993), 58 FR 59083 (File No. SR-
NASD-93-49) (approving NASD proposal to extend Bond Quotation Data
Service fees to non-member subscribers); 34272 (June 28, 1994), 59
FR 34701 (File No. SR-Amex-94-12) (approving Amex proposal to reduce
maximum fees for original stock listings by domestic and foreign
issuers).
\5\9For example, if an SRO proposes a reasonable and relatively
minor increase in an existing fee, or a proposal that is virtually
identical to fees of other SROs, provided that the proposal does not
raise other regulatory issues, such proposal would qualify under the
noncontroversial category.
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Furthermore, the Commission will retain a flexible approach in
applying amended Rule 19b-4. For example, absent unusual circumstances,
filings that are virtually identical to an SRO filing already approved
by the Commission will be eligible for expedited treatment under the
noncontroversial category. While the Commission generally requires that
proposals for exchange listing of new hybrid securities be submitted to
the Commission for full review pursuant to Section 19(b)(2) of the Act
to ensure that all significant regulatory concerns have been addressed,
the Commission also believes that new proposals relating to these
products that only change certain characteristics of the products could
be eligible for expedited treatment under the noncontroversial
category. Once the staff has completed the review process for a
particular new product, the need for a full review of subsequent
similar proposals is significantly reduced. For example, the Commission
has required exchanges to submit for full review under Section 19(b)(2)
proposals to list and trade MITTS and SUNS, which are products linked
to various baskets of securities.60 Because the review of new
proposals that seek to change, for example, only the composition of the
underlying baskets generally will be limited to the composition of
those baskets, and because the Commission is now familiar with the
basic structure for MITTS and SUNS, subsequent proposals should be
eligible for the noncontroversial category.61 This will expedite
the approval of the listing of these products.
---------------------------------------------------------------------------
\6\0See Securities Exchange Act Release No. 32840 (September 2,
1993), 58 FR 47485 (order approving Global Telecommunications MITTS
portfolio).
\6\1See, e.g., Securities Exchange Act Release No. 34655
(September 12, 1994), 59 FR 47966 (order approving the listing of
REIT Portfolio MITTS); Securities Exchange Act Release No. 33495
(January 19, 1994), 59 FR 03883 (order approving the listing of
Telecommunications Basket SUNS).
---------------------------------------------------------------------------
The Commission notes, however, that an expedited approach would not
necessarily apply, as the Amex suggested, to a proposal to trade index
warrants on a stock index previously approved by the Commission for
options trading. While use of the procedure could be considered on a
case by case basis, as a general rule different types of derivative
products, albeit based on the same underlying index, may not be
sufficiently identical to be eligible for this treatment.
With respect to the concern that a competitor may cause a proposed
rule change of an SRO to be deemed improperly filed under the
noncontroversial category merely by submitting a comment letter
critical of the filing, the Commission expects that a comment letter
would have to raise issues that legitimately suggest that the proposed
rule change is inconsistent with the requirements of the Exchange Act
or regulations thereunder applicable to that SRO in order for the rule
change to be abrogated and refiled under Section 19(b)(2).
The CBOE commented that it is unclear whether the notice published
by the Commission indicating that a rule change has become effective
upon filing would be sufficient to prevent a collateral attack based on
the assertion that the rule change was improperly filed under the Act.
The Commission concurs with the CBOE's interpretation that a rule
change filed under Rule 19b-4(e) is deemed to have been properly filed
thereunder if the Commission fails to abrogate it within the 60 day
period for such action.
Finally, the CHX urged the Commission to interpret all corporate
governance changes that do not decrease the number of public governors
as being within the provision of Section 19(b)(3)(A) that permits a
proposed rule change to take effect upon filing if it is ``concerned
solely with the administration of the SRO.'' The governance structure
of the SROs is the subject of specific statutory standards. Because a
change in the overall makeup of the governance structure of an SRO
could be effected without necessarily decreasing the number of public
governors, the Commission does not concur in this interpretation.
In sum, the Commission is adopting amendments to Rule 19b-4 for the
noncontroversial category with the following modifications: (1) the 30-
day period after which a noncontroversial filing may become effective
will begin with the filing date; (2) Form 19b-4 will state that an SRO
requesting the Commission to shorten the 30-day period should provide a
statement explaining its reasons for so requesting; and (3) Rule 19b-4
will permit the Commission to shorten the 5-day period in which SROs
are required to file a notice of their intent to file, if
appropriate.62
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\6\2The Commission is delegating to the Director of the Division
of Market Regulation the functions of shortening the 30 and five-day
periods. See Section II.C. below.
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C. Delegation of Authority to the Director of the Division of Market
Regulation
The Commission currently has the authority under Section
19(b)(3)(C) of the Exchange Act to abrogate summarily within 60 days of
filing any proposed rule change that becomes effective under Section
19(b)(3)(A) 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 Exchange
Act.63 The Proposing Release indicated that if the proposals to
expand the scope of Section 19(b)(3)(A) are adopted, the Commission
will revise its rules to delegate this abrogation authority to the
Director of the Division of Market Regulation.
---------------------------------------------------------------------------
\6\315 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------
As indicated in the Proposing Release, this would be necessary to
facilitate an expected increase in the volume of proposed rule changes
that would be filed under Section 19(b)(3)(A). In particular, the
Commission expects that the staff will abrogate filings if it becomes
aware of issues that would warrant further consideration under the
procedures set forth in Section 19(b)(2), such as those involving
possible burdens on competition or effects on investor protection.
Accordingly, the Commission is delegating this function, as well as the
related functions of shortening the 30 and five-day periods under
paragraph (e)(6) of Rule 19b-4, to the Director of the Division.
In addition, the Commission is delegating to the Director of the
Division the authority under Section 19(b)(2)(B) of the Exchange Act to
institute proceedings to determine whether a proposed rule change
should be disapproved.64 It is the Commission's view at this time
that filings that are not resolved within six months of submission
generally should be withdrawn or, in the alternative, subject to
disapproval proceedings. Although the Commission has directed its staff
to request that SROs withdraw a number of filings of proposed rule
changes not approved within that period, this delegation of authority
is necessary to enable the Division to implement these internal
guidelines.
---------------------------------------------------------------------------
\6\415 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
The Commission does not intend to prevent SROs from moving forward
with their rule changes. The Commission suggests, however, that when it
becomes obvious that a resolution of issues for a particular filing is
not forthcoming, it may be more appropriate for the SRO to advance the
initiative outside of the rule filing mechanism until such time as it
is in form for approval. The staff of the Commission will be available
to assist SROs in this regard.65 The Commission believes that this
will maintain accountability on the part of both Commission staff and
SROs by assuring that complex filings are not abandoned and allowed to
stagnate within the rule filing process. These amendments add new
paragraphs (a)(57), (a)(58), and (a)(59) to Rule 30-3 of the
Commission's rules of Organization and Program Management.
---------------------------------------------------------------------------
\6\5The Commission recognizes that in certain instances there
will be differences in opinion between the staff and SROs regarding
the handling of a rule filing. In such instances, the SROs are
always free to inform the Commission so that it may help expedite
the processing of the filing in an appropriate manner.
---------------------------------------------------------------------------
D. Submission of Form 19b-4 on Computer Diskette and Miscellaneous
Amendments
The Commission noted in the Proposing Release that significant
staff resources are devoted to processing proposed rule changes and
preparing them for publication, and encouraged SROs to submit Form 19b-
4 and the notice for publication (Exhibit 1 to the form) on computer
diskette in an appropriate wordprocessing format.66 The paper
version of these documents would continue to be required, but the
electronic version would provide a more efficient way for Commission
staff to review and prepare the initial notice for publication in the
Federal Register.
---------------------------------------------------------------------------
\6\6Currently, the staff of the Commission uses Wordperfect 5.0.
---------------------------------------------------------------------------
The Commission also is adopting amendments as proposed that will
reduce the number of copies of Form 19b-4 and Exhibit 1 that SROs must
submit from twelve to nine, including the manually signed original.
Although the Commission originally proposed reducing the number of
copies to eight, it has determined that nine copies would be optimal
based on current staff distribution requirements. In addition, the
Commission is correcting miscellaneous outdated references contained in
the form with respect to the Commission's address and appropriate
offices within the Division to which filings of proposed rule changes
should be directed.
III. Amendments to the Annual Filing Requirements for SROs and the
MSRB
A registered or exempted securities exchange generally must file
annual amendments to its registration statement with the Commission
pursuant to Rule 6a-2 under the Exchange Act.67 The information
contained in these annual filings includes, among other things, lists
of officers, governors, and committee members, as well as various forms
used by the exchange, listing applications, listing fee schedules,
membership lists, and securities listed on the exchange.68
Exchange Act rules also contain similar annual filing requirements for
national securities associations69 and the MSRB.70
---------------------------------------------------------------------------
\6\7Exchange Act Rule 6a-2, 17 CFR 240.6a-2. These filings are
submitted on Exchange Act Form 1-A, 17 CFR 249.1a.
\6\8Rule 6a-2(b) also requires the filing of complete sets of
the constitution, by-laws, rules, and related documents of the
exchange, but only once every three years.
\6\9See Exchange Act Rule 15Aj-1, 17 CFR 240.15Aj-1; Form X-
15AJ-2, 17 CFR 249.803. Currently, the NASD is the only national
securities association registered with the Commission.
\7\0See Exchange Act Rule 17a-21, 17 CFR 240.17a-21.
---------------------------------------------------------------------------
In the Proposing Release, the Commission stated that some of this
information is either publicly available, becomes available to the
Commission through other means, or is not useful enough to justify the
burden placed on the exchanges in collecting and filing it with the
Commission each year. The Commission thus proposed amendments to
streamline and conform the annual filing requirements for SROs.
A. Rule 6a-2: Annual Filing Requirements of Exchanges
The proposed amendments would eliminate or reduce the annual filing
requirement for certain information, and give exchanges flexibility in
making their filings. Commenters supported this proposal. The NYSE
suggested that the Commission adopt more extensive amendments that
would relieve SROs of the need to file any information annually that is
made available to the Commission throughout the year in periodic
publications, such as an exchange's bulletins and information memos.
The Commission has determined to adopt the amendments to Rule 6a-2
as proposed, with the exception of one minor modification concerning
the proposal to add the date of election to membership for each member,
discussed below at Section III.B. The amendments to Rule 6a-2 will
eliminate or reduce the information required to be filed annually in
the following exhibits to exchange registration: Exhibit B (forms
pertaining to application for membership and approval as a person
associated with a member); Exhibit C (forms of financial statements,
reports, or questionnaires relating to financial responsibility);
Exhibit D (documents comprising listing applications including
agreements required in connection therewith, and a schedule of listing
fees); Exhibit I (list of all individual members and related
information); Exhibit J (certain information related to a list of all
member organizations of the exchange); and Exhibit K (schedule of
securities listed on the exchange).
In addition, the amendments to Rule 6a-2 would provide the
following alternatives to the annual filing requirement for the
remaining exhibits to exchange registration other than Exhibits E and F
(i.e., Exhibits A(1), A(2), A(3), G, H, J, L, and M).71 Exchanges
would have the option, in lieu of the annual filing, to publish or
cooperate in the publication of this information on an annual or more
frequent basis, and to certify to the accuracy of the information.
Exchanges would have the additional option of keeping the information
in Exhibits A(1), A(2), A(3), L, and M up to date, and certifying that
the information is up to date and available to the Commission and the
public upon request.
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\7\1Exhibit A(1) contains the constitution, articles of
incorporation, by-laws, and rules of the exchange; Exhibit A(2)
contains written rulings, settled practices, and interpretations not
contained in A(1); Exhibit A(3) contains the constitution, articles
of incorporation, by-laws, and rules of each affiliate or subsidiary
of the exchange; Exhibit G contains a list of officers and committee
members; Exhibit H contains similar information for affiliates or
subsidiaries; Exhibit L contains a schedule of securities admitted
to unlisted trading practices; and Exhibit M contains a schedule of
unregistered securities admitted to trading on the exchange that are
exempt from registration.
---------------------------------------------------------------------------
In response to the recommendation that SROs be relieved of the need
to file altogether any information that may be available to the
Commission, the Commission believes that it would be inconsistent with
the requirements of Section 6 of the Exchange Act to rely upon
informal, piecemeal publications as a surrogate for a comprehensive
filing that is a component of an exchange's registration with the
Commission. Furthermore, some of the required exhibits deal with
financial information of the exchange that enable the Commission to
comply with its obligations to provide Congress with a statement and
analysis of the expenses and operations of each SRO.72
---------------------------------------------------------------------------
\7\2See Exchange Act Sec. 23(b), 15 U.S.C. 78w(b).
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B. Rule 15Aj-1 and Form X-15AJ-2; Rule 17a-21: Annual Filing
Requirements for Securities Associations and Reports of the Municipal
Securities Rulemaking Board
Both the NASD and the MSRB endorsed the proposal to streamline
their annual filing requirements and conform them to the requirements
now applicable to exchanges.73 The Commission is adopting
amendments to Rules 15Aj-1, 17a-21, and Form X-15AJ-2 under the
Exchange Act to streamline the annual filing requirements for the NASD
and MSRB and make them more uniform. Like exchanges, these SROs will
have similar alternative options for the filing of comparable
information.
---------------------------------------------------------------------------
\7\3In its comment letter, the NASD also recommended that the
Commission review the filing requirements applicable to exclusive
securities information processors (``SIPs''), similarly to eliminate
obsolete or duplicate filing requirements. This suggestion is
outside the scope of the original proposal. Nevertheless, the
Commission intends to review and streamline the annual filing
requirements applicable to exclusive SIPs.
---------------------------------------------------------------------------
With respect to the proposal to add the date of election to
membership for each member, the NASD commented that in some cases this
date is not readily available and may be difficult to report. While the
Commission is adopting the requirement to add the date of election to
membership for each member, this information will be required only for
those members elected to membership after December 31, 1994. A
conforming modification also has been made to Rule 6a-2 for exchanges,
thus applying the same standard to all SROs. This information serves an
important purpose by enabling Commission staff to monitor the
obligation of broker-dealers to become members of an SRO,74 and
designate an appropriate designated examining authority for member
broker-dealers.75
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\7\4Exchange Act Sec. 15(b)(8), 15 U.S.C. 78o(b)(8). The
importance of this information is also highlighted by Exchange Act
Sec. 15(b)(1)(B), 15 U.S.C. 78o(b)(1)(B), as amended by the
Government Securities Act Amendments of 1993, Pub. L. No. 103-202,
107 Stat. 2345 (1993), which conditions the effectiveness of broker-
dealer registration with the Commission on such SRO membership.
\7\5Where a broker-dealer is a member of more than one SRO, the
Commission has authority to designate to one SRO the responsibility
for examining the member for compliance with applicable financial
responsibility rules. Exchange Act Sec. 17(d)(1), 15 U.S.C.
78q(d)(1); 17 CFR 240.17d-1.
---------------------------------------------------------------------------
IV. Effects on Competition and Regulatory Flexibility Act
Considerations
Section 23(a)76 of the Act requires the Commission, in
adopting rules under the Act, to consider the impact on competition of
those rules, if any, and to balance that impact against the regulatory
benefits gained in terms of furthering the purposes of the Act. The
amendments to Rule 19b-4 apply to all SROs. Furthermore, the amendments
are intended to expedite for all SROs a process to which they already
are subject under the Act. Similarly, the amendments to the annual
filing requirements for SROs are designed to streamline and make
uniform those requirements. The Commission is of the view, therefore,
that adoption of the proposed amendments to Rules 19b-4, 6a-2, 15Aj-1,
17a-21, and Forms 19b-4 and X-15AJ-2 would not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act.
---------------------------------------------------------------------------
\7\615 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------
In addition, Section 3(a) of the Regulatory Flexibility Act77
requires the Commission to undertake an initial regulatory flexibility
analysis of the proposed amendments on small entities unless the
Chairman certifies that the rule, if adopted, would not have a
significant economic impact on a substantial number of small
entities.78 Rule 19b-4 and Form 19b-4 apply only to SROs. Rule 6a-
2 applies only to national securities exchanges. Rule 15Aj-1 and Form
X-15AJ-2 apply only to national securities associations. Rule 17a-21
applies only to the MSRB. Furthermore, the proposed amendments are
intended to streamline a process to which these SROs already are
subject. In the Proposing Release, the Commission indicated that the
Chairman has certified that the amendments to Rule 19b-4, Form 19b-4,
and Rule 6a-2 would not have a significant economic impact on a
substantial number of small entities. The Commission did not receive
any comments on the regulatory flexibility certification. The Chairman
also has certified that the amendments to Rules 15Aj-1 and 17a-21, and
Form X-15AJ-2 would not have a significant economic impact on a
substantial number of small entities. This certification, including the
reasons therefore, is attached as Appendix A to this release.
---------------------------------------------------------------------------
\7\75 U.S.C. 603(a).
\7\85 U.S.C. 605(b).
---------------------------------------------------------------------------
List of Subjects
17 CFR Part 200
Administrative practice and procedure, Authority delegations
(Government agencies), Organizations and functions (Government
organizations).
17 CFR Parts 240 and 249
Reporting and recordkeeping requirements, Securities.
Statutory Basis and Text of Proposed Amendments
In accordance with the foregoing, Title 17, Chapter II of the Code
of Federal Regulations is amended as follows:
PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND
REQUESTS
1. The authority citation for Part 200, subpart A continues to read
in part as follows:
Authority: 15 U.S.C. 77s, 78d-1, 78d-2, 78w, 78ll(d), 79t,
77sss, 80a-37, 80b-11, unless otherwise noted.
* * * * *
2. Section 200.30-3 is amended by adding paragraphs (a)(57),
(a)(58), and (a)(59) to read as follows:
Sec. 200.30-3 Delegation of authority to Director of Division of
Market Regulation.
* * * * *
(a) * * *
(57) Pursuant to Section 19(b)(2)(B) of the Act, 15 U.S.C.
78s(b)(2)(B), to institute proceedings to determine whether a proposed
rule change of a self-regulatory organization should be disapproved.
(58) Pursuant to Section 19(b)(3)(C) of the Act, 15 U.S.C.
78s(b)(3)(C), to abrogate a change in the rules of a self-regulatory
organization and require that it be refiled in accordance with Section
19(b)(1), 15 U.S.C. 78s(b)(1), and reviewed in accordance with Section
19(b)(2), 15 U.S.C. 78s(b)(2), of the Act.
(59) Pursuant to paragraph (e)(6)(iii) of Rule 19b-4 (Sec. 240.19b-
4 of this chapter), to reduce the period before which a proposed rule
change can become operative, and to reduce the period between an SRO
submission of a filing and a pre-filing notification.
* * * * *
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
3. The authority citation for Part 240 continues to read in part as
follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg,
77nnn, 77sss, 77ttt, 78c, 78d, 78i, 78j, 78l, 78m, 78n, 78o, 78p,
78q, 78s, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-
37, 80b-3, 80b-4 and 80b-11, unless otherwise noted.
* * * * *
Sec. 2640.6a-2 [Amended]
4. Paragraph (a)(1) of Sec. 240.6a-2 is amended by removing ``, or
in Exhibits B, C and D,'' and ``and Exhibits B, C and D''.
5. Revise paragraph (a)(3) of Sec. 240.6a-2 to read as follows:
Sec. 240.6a-2 Periodic amendments to registration statements or
exemption statements of exchanges.
(a) * * *
(3) Complete Exhibits G, H, J, L and M, which shall be up to date
as of the latest practicable date within 3 months of the date on which
the annual amendment is filed, except that:
(i) Exhibit J need only contain the name and principal place of
business of each member organization, and for each member organization
elected to membership after December 31, 1994, the date of election to
membership;
(ii) If a national securities exchange publishes or cooperates in
the publication of the information required in these exhibits on an
annual or more frequent basis, in lieu of filing such an exhibit a
national securities exchange may:
(A) Identify the publication in which such information is
available, the name, address, and telephone number of the person from
whom such publication may be obtained, and the price thereof; and
(B) Certify to the accuracy of such information as of its date;
(iii) If a national securities exchange keeps the information
required in Exhibits L and M up to date and makes it available to the
Commission and the public on request, in lieu of filing such an
exhibit, a national securities exchange may certify that the
information is kept up to date and is available to the Commission and
the public upon request.
* * * * *
6. Section 240.6a-2 is amended by revising paragraph (b) to read as
follows:
Sec. 240.6a-2 Periodic amendments to registration statements or
exemption statements of exchanges.
* * * * *
(b) Unless exempted pursuant to paragraph (c) of this section, on
or before June 30, 1983, and every three years thereafter each exchange
registered as a national securities exchange shall file complete
Exhibits A(1), A(2) and A(3) to its registration statement, which shall
be up to date as of the latest practicable date within 3 months of the
date on which these exhibits are filed, except that:
(1) If a national securities exchange publishes or cooperates in
the publication of the information required in these exhibits on an
annual or more frequent basis, in lieu of filing such an exhibit a
national securities exchange may:
(i) Identify the publication in which such information is
available, the name, address, and telephone number of the person from
whom such publication may be obtained, and the price thereof; and
(ii) Certify to the accuracy of such information as of its date;
(2) If a national securities exchange keeps the information
required in these exhibits up to date and makes it available to the
Commission and the public on request, in lieu of filing such an
exhibit, a national securities exchange may certify that the
information is kept up to date and is available to the Commission and
the public upon request.
* * * * *
7. Paragraph (c)(1) of Sec. 240.15Aj-1 is revised to read as
follows:
Sec. 240.15Aj-1 Amendments and supplements to registration statements
of securities associations.
* * * * *
(c) Annual supplements. (1) Promptly after March 1 of each year,
the association shall file with the Commission an annual consolidated
supplement as of such date on Form X-15AJ-2 (Sec. 249.803) except that:
(i) If the securities association publishes or cooperates in the
publication of the information required in Items 6(a) and 6(b) of Form
X-15AJ-2 on an annual or more frequent basis, in lieu of filing such an
item the securities association may:
(A) Identify the publication in which such information is
available, the name, address, and telephone number of the person from
whom such publication may be obtained, and the price thereof; and
(B) Certify to the accuracy of such information as of its date.
(ii) Promptly after March 1, 1995, and every three years thereafter
each association shall file complete Exhibit A to Form X-15AJ-2. The
information contained in this exhibit shall be up to date as of the
latest practicable date within 3 months of the date on which these
exhibits are filed. If the association publishes or cooperates in the
publication of the information required in this exhibit on an annual or
more frequent basis, in lieu of filing such exhibit the association
may:
(A) Identify the publication in which such information is
available, the name, address, and telephone number of the person from
whom such publication may be obtained, and the price thereof; and
(B) Certify to the accuracy of such information as of its date. If
a securities association keeps the information required in this exhibit
up to date and makes it available to the Commission and the public upon
request, in lieu of filing such an exhibit a securities association may
certify that the information is kept up to date and is available to the
Commission and the public upon request.
* * * * *
8. By revising paragraph (a)(4) of Sec. 240.17a-21 to read as
follows:
Sec. 240.17a-21 Reports of the Municipal Securities Rulemaking Board.
(a) * * *
(4) The Municipal Securities Rulemaking Board shall include in its
annual report a statement and an analysis of its expenses and
operations including:
(i) A balance sheet as of the end of the period covered by the
report and a statement of revenues and expenses for the Board for that
period;
(ii) The rules of the Board including any written interpretations
of the rules or staff interpretive letters, except that this
information may be included in the annual report once every three years
and shall be up to date as of the latest practicable date within 3
months of the date on which this information is filed. If the Board
publishes or cooperates in the publication of this information on an
annual or more frequent basis, in lieu of including such information in
the annual report the Board may:
(A) Identify the publication in which such information is
available, the name, address, and telephone number of the person from
whom such publication may be obtained, and the price thereof; and
(B) Certify to the accuracy of such information as of its date. If
the Board keeps this information up to date and makes it available to
the Commission and the public upon request, in lieu of filing such
information the Board may certify that the information is kept up to
date and is available to the Commission and the public upon request;
(iii) The following information concerning members of the Board:
(A) Name;
(B) Dates of commencement and termination of present term of
office;
(C) Length of time each member has held such office;
(D) Name of principal organization with which connected;
(E) Title; and
(F) City wherein the principal office of such organization is
located;
(iv) Address of the Board, the name and address of each person
authorized to receive notices on behalf of the Board from the
Commission, and the name and address of counsel to the Board, if any;
and
(v) A list, including addresses, as of the latest practicable date,
alphabetically arranged, of all municipal securities brokers and
municipal securities dealers which have paid to the Board fees and
charges to defray the costs and expenses of operating the Board.
* * * * *
9. Paragraph (e) of Sec. 240.19b-4 is revised to read as follows:
Sec. 240.19b-4 Filings with respect to proposed rule changes by self-
regulatory organizations.
* * * * *
(e) A proposed rule change may take effect upon filing with the
Commission pursuant to Section 19(b)(3)(A) of the Act, 15 U.S.C.
78s(b)(3)(A), if properly designated by the self-regulatory
organization as:
(1) Constituting a stated policy, practice, or interpretation with
respect to the meaning, administration, or enforcement of an existing
rule;
(2) Establishing or changing a due, fee, or other charge;
(3) Concerned solely with the administration of the self-regulatory
organization;
(4) Effecting a change in an existing service of a registered
clearing agency that:
(i) Does not adversely affect the safeguarding of securities or
funds in the custody or control of the clearing agency or for which it
is responsible; and
(ii) Does not significantly affect the respective rights or
obligations of the clearing agency or persons using the service;
(5) Effecting a change in an existing order-entry or trading system
of a self-regulatory organization that:
(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 have the effect of limiting the access to or
availability of the system; or
(6) Effecting a change that:
(i) Does not significantly affect the protection of investors or
the public interest;
(ii) Does not impose any significant burden on competition; and
(iii) By its terms, does not 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; provided that the self-regulatory organization has given the
Commission written 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.
* * * * *
PART 249--FORM, SECURITIES EXCHANGE ACT OF 1934
10. The authority citation for Part 249 continues to read in part
as follows:
Authority: 15 U.S.C. 78a, et seq., unless otherwise noted;
* * * * *
Sec. 249.803 [Amended]
11. Form X-15AJ-2 (referenced in Sec. 249.803) is amended by
removing items numbered 7 through 28 and redesignating item 29 as
number 7.
Note: Form X-15AJ-2 does not and these amendments will not
appear in the Code of Federal Regulations.
Sec. 249.803 [Amended]
12. Form X-15AJ-2 (referenced in Sec. 249.803) is amended by
revising Exhibit C to reads as follows:
Note: Form X-15AJ-2 does not and these amendments will not
appear in the Code of Federal Regulations.
Form X-15AJ-2
* * * * *
Exhibits to be Furnished With This Supplement
* * * * *
Exhibit C. A list, as of latest practicable date, alphabetically
arranged, of all members of the association indicating for each--
(1) the name;
(2) the principal place of business; and
(3) the date of election to membership for each member elected
to membership after December 31, 1994.
Sec. 249.819 [Amended]
13. By revising the first sentence of instruction F of the general
instructions of Form 19b-4 (referenced in Sec. 249.819) to read as
follows, and by removing the asterisk contained therein along with its
accompanying footnote:
Note: Form 19b-4 does not and these amendments will not appear
in the Code of Federal Regulations.
Form 19b-4
* * * * *
General Instructions
* * * * *
F. Signature and Filing of the Completed Form
Nine copies of Form 19b-4, nine copies of Exhibit 1, four copies
of Exhibits 2 and 3, and two copies of Exhibit 4 shall be filed
with, in the case of filings by securities exchanges, the Assistant
Director for Derivatives and Exchange Oversight, in the case of
filings by securities associations or the Municipal Securities
Rulemaking Board, the Assistant Director for NMS and OTC, and in the
case of filings by clearing agencies, the Assistant Director for
Securities Processing, Division of Market Regulation, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington D.C. 20549.
* * *
* * * * *
Sec. 249.819 [Amended]
14. Item 7 of the Information to Be Included in the Completed Form
of Form 19b-4 (referenced in Sec. 249.819) is amended by removing the
word ``or'' from the end of paragraph (b)(iii) and adding paragraphs
(b)(v) and (b)(vi) to read as follows:
Note: Form 19b-4 does not and these amendments will not appear
in the Code of Federal Regulations.
Form 19b-4
* * * * *
7. Basis for Summary Effectiveness Pursuant to Section 19(b)(3)
or for Accelerated Effectiveness Pursuant to Section 19(b)(2).
* * * * *
(b) * * *
(v) effects a change in an existing order-entry or trading
system of a self-regulatory organization that (A) does not
significantly affect the protection of investors or the public
interest; (B) does not impose any significant burden on competition;
and (C) does not have the effect of limiting the access to or
availability of the system, or
(vi) effects a change that (A) does not significantly affect the
protection of investors or the public interest; (B) does not impose
any significant burden on competition; and (C) by its terms, does
not 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; provided that
the self-regulatory organization has given the Commission written
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. If it
is requested that the proposed rule change become operative in less
than 30 days, provide a statement explaining why the Commission
should shorten this time period.
* * * * *
Sec. 249.819 [Amended]
15. Section IV of Exhibit 1 of Form 19b-4 (referenced in
Sec. 249.819) is amended by removing ``500 North Capitol Street,'' and
adding in its place ``450 Fifth Street, N.W.,'' and removing ``Public
Reference Section, 1100 L Street N.W.,'' and adding in its place
``Public Reference Room in''.
Note: Form 19b-4 does not and these amendments will not appear
in the Code of Federal Regulations.
By the Commission.
Dated: December 20, 1994.
Margaret H. McFarland,
Deputy Secretary.
Note: This Appendix to the Preamble will not appear in the Code
of Federal Regulations
Appendix A
Securities and Exchange Commission Regulatory Flexibility Act
Certification
I Arthur Levitt, Chairman of the Securities and Exchange
Commission, hereby certify pursuant to 5 U.S.C. 605(b) that proposed
amendments to Rules 15Aj-1 and 17a-21, and Form X-15AJ-2 under the
Securities Exchange Act of 1934 set forth in Securities Exchange Act
Release No. 35123, if promulgated, will not have a significant economic
impact on a substantial number of small entities. The reason for this
certification is that the rules and form apply only to the National
Association of Securities Dealers and the Municipal Securities
Rulemaking Board, and consequently would not impose any significant
economic impact on a substantial number of small entities, as that term
is defined under the Regulatory Flexibility Act. Furthermore, the
proposed amendments are intended to streamline a process to which these
self-regulatory organizations already are subject.
Dated: December 20, 1994.
Arthur Levitt,
Chairman.
[FR Doc. 94-31657 Filed 12-27-94; 8:45 am]
BILLING CODE 8010-01-P