[Federal Register Volume 66, Number 161 (Monday, August 20, 2001)]
[Rules and Regulations]
[Pages 43721-43752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-20735]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 202, 240, and 249

[Release No. 34-44692; File No. S7-10-01]
RIN 3235-AI20


Registration of National Securities Exchanges Pursuant to Section 
6(g) of the Securities Exchange Act of 1934 and Proposed Rule Changes 
of Certain National Securities Exchanges and Limited Purpose National 
Securities Associations

AGENCY: Securities and Exchange Commission.

ACTION: Final rule; request for comments.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
adopting Rule 6a-4 under the Securities Exchange Act of 1934 
(``Exchange Act'') and registration Form 1-N prescribing the 
requirements for designated contract markets and derivative transaction 
execution facilities to register as national securities exchanges 
pursuant to section 6(g)(1) of the Exchange Act to trade security 
futures products. The Commission also is adopting conforming amendments 
to Rules 6a-2 and 6a-3 under the Exchange Act and Rule 202.3 of the 
Commission's procedural rules. In addition, the Commission is adopting 
Rule 19b-7, Form 19b-7, and amendments to Rule 19b-4 and Form 19b-4 to 
accommodate proposed rule changes submitted by national securities 
exchanges registered pursuant to section 6(g) of the Exchange Act and 
limited purpose national securities associations registered pursuant to 
section 15A(k) of the Exchange Act. These rules and forms, and 
amendments to existing rules and forms, are necessary to implement the 
Commodity Futures Modernization Act of 2000 (``CFMA''). In addition, 
the Commission is requesting public comment on whether the Commission 
should adopt changes to Rule 19b-7 and Form 19b-7 if the Commission 
were to adopt proposed Rule 19b-6 and proposed Form 19b-6.

DATES: Effective Date: August 20, 2001.
    Comments Due: September 4, 2001.

ADDRESSES: All comments concerning whether the Commission should adopt 
changes to Rule 19b-7 and Form 19b-7 if the Commission were to adopt 
proposed Rule 19b-6 and proposed Form 19b-6, discussed below, should be 
submitted in triplicate to Jonathan G. Katz, Secretary, U.S. Securities 
and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-
0609. Comments also may be submitted electronically at the following e-
mail address: [email protected]. All comment letters should refer 
to File No. S7-03-01; this file number should be included on the 
subject line if e-mail is used. Comment letters will be available for 
inspection and copying in the Commission's Public Reference Room at the 
same address. Electronically submitted comment letters will be posted 
on the Commission's Internet web site (http://www.sec.gov). Personal 
identifying information, such as names or e-mail addresses, will not be 
edited from electronic submissions. Submit only information you wish to 
make publicly available.

FOR FURTHER INFORMATION CONTACT: Deborah Flynn, Assistant Director, at 
(202) 942-0075; Kelly Riley, Special Counsel, at (202) 942-0752; 
Michael Gaw, Special Counsel, at (202) 942-0158; and Cyndi Nguyen, 
Attorney, at (202) 942-4163, Division of Market Regulation, Securities 
and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-
1001.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Notice Registration of Security Futures Product Exchanges
    A. Background
    B. Discussion
    1. Description of Proposed Rules
    2. Registration Requirements for Security Futures Product 
Exchanges Filing Form 1-N
    3. Filing of Periodic Amendments
    a. Amendments in Case of Inaccurate or Incomplete Information
    b. Other Periodic Updates
    c. Exemption from Requirement to File Paper Copies of All 
Exhibits
    4. Filing of Supplemental Material
    a. Material Issued to Members, Participants, or Subscribers
    b. Trading Reports
    5. Exemption from Requirement to Update Exhibit C
    6. Proposed Amendments to Exchange Act Rules 6a-2 and 6a-3
    7. Processing of Form 1-N
III. Procedures for Filing Proposed Rule Changes by Security Futures 
Product Exchanges and Limited Purpose National Securities 
Associations
    A. Background
    1. Proposed Rule Changes that Relate to Margin
    2. Other Proposed Rule Changes Related to Security Futures 
Products
    3. Proposed Rule Changes that Have Been Abrogated
    B. Discussion
    1. Description of Proposed Rules
    2. Proposed Rule Changes by Security Futures Product Exchanges 
and Limited Purpose National Securities Associations Related to 
Margin
    3. Proposed Rule Changes by Security Futures Product Exchanges 
and Limited Purpose National Securities Associations Required to Be 
Filed under Section 19(b)(7) of the Exchange Act
    4. Proposed Rule Changes Abrogated by the Commission and Refiled 
by a Security Futures Product Exchange or Limited Purpose National 
Securities Association
    C. Solicitation of Comments
IV. Administrative Procedure Act
V. Paperwork Reduction Act
    A. Rule 6a-4 and Form 1-N
    1. Summary of Collection of Information
    2. Proposed Use of Information
    3. Respondents
    4. Total Annual Reporting and Recordkeeping Burden

[[Page 43722]]

    a. One-time Costs
    b. Annual Costs
    1. Record Retention Period
    2. Collection of Information Is Mandatory
    3. Confidentiality
    B. Proposed Rule 19b-7 and Proposed Form 19b-7
    1. Summary of Collection of Information
    2. Proposed Use of Information
    3. Respondents
    4. Total Annual Reporting and Recordkeeping Burden
    5. Record Retention Period
    6. Collection of Information Is Mandatory
    7. Confidentiality
    C. Proposed Amendments to Rule 19b-4 and Form 19b-4
    1. Summary of Collection of Information
    2. Proposed Use of Information
    3. Respondents
    4. Total Annual Reporting and Recordkeeping Burden
    5. Record Retention Period
    6. Collection of Information Is Mandatory
    7. Confidentiality
VI. Costs and Benefits of Final Rules
    A. Comments
    B. Costs and Benefits of Rule 6a-4, Form 1-N, and Conforming 
Amendments to Rules 6a-2 and 6a-3 under the Exchange Act and Rule 
202.3 of the Commission's Procedural Rules
    1. Benefits
    2. Costs
    C. Costs and Benefits of Rule 19b-7 and Form 19b-7 and 
Conforming Amendments to Rule 19b-4 and Form 19b-4
    1. Benefits
    2. Costs
VII. Consideration of the Burden on Competition, and Promotion of 
Efficiency, Competition, and Capital Formation
VIII. Summary of Regulatory Flexibility Act Certification
IX. Statutory Authority

I. Introduction

    The CFMA authorizes the trading of futures on individual stocks and 
narrow-based stock indexes, including puts, calls, straddles, options, 
or privileges thereon (collectively, ``security futures products'').\1\ 
Security futures products are ``securities'' under the Exchange Act,\2\ 
the Securities Act of 1933,\3\ the Investment Company Act of 1940,\4\ 
and the Investment Advisers Act of 1940,\5\ and are contracts of sale 
for future delivery under the Commodity Exchange Act (``CEA'').\6\ 
Accordingly, the regulatory framework established by the CFMA for the 
markets and intermediaries trading security futures products provides 
the Commission and the Commodity Futures Trading Commission (``CFTC'') 
with joint jurisdiction.
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    \1\ Pub. L. No. 106-554, Appendix E, 114 Stat. 2763.
    \2\ Section 3(a)(10) of the Exchange Act, 15 U.S.C. 78c(a)(10).
    \3\ Section 2(a)(1) of the Securities Act of 1933, 15 U.S.C. 
77b(a)(1).
    \4\ Section 2(a)(36) of the Investment Company Act of 1940, 15 
U.S.C. 80a-2(a)(36).
    \5\ Section 202(a)(18) of the Investment Advisers Act of 1940, 
15 U.S.C. 80b-2(a)(18).
    \6\ Section 1a(31) of the CEA, 7 U.S.C. 1a(31).
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    Because security futures products are securities under the Exchange 
Act, any organization, association, or group of persons that 
constitutes, maintains, or provides a market place or facilities for 
bringing together purchasers and sellers of security futures products 
must register with the Commission as a national securities exchange.\7\ 
New subsection 6(g) of the Exchange Act \8\ provides an expedited 
process for an exchange that lists or trades security futures products 
to register with the Commission as a national securities exchange if 
that exchange (i) is a board of trade that has been designated as a 
contract market or is registered as a derivative transaction execution 
facility; and (ii) does not act as a market place for transactions in 
securities other than security futures products (``futures 
markets'').\9\
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    \7\ See Section 5 of the Exchange Act, 15 U.S.C. 78e. See also 
Section 3(a)(1) of the Exchange Act for the definition of 
``exchange.'' 15 U.S.C. 78c(a)(1).
    \8\ 15 U.S.C. 78f(g).
    \9\ Section 6(g)(1) of the Exchange Act, 15 U.S.C. 78f(g)(1).
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    In addition, the CFMA amended the Exchange Act to exempt exchanges 
registered pursuant to section 6(g) of the Exchange Act (``Security 
Futures Product Exchanges'')\10\ and limited purpose national 
securities associations registered pursuant to section 15A(k) of the 
Exchange Act (``Limited Purpose National Securities Associations'') 
\11\ from the requirement to file with the Commission proposed rule 
changes, except for certain specified types of rules, and to provide an 
expedited filing process for most of these rules.\12\
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    \10\ 15 U.S.C. 78f(g).
    \11\ 15 U.S.C. 78o-3(k). A futures association registered under 
Section 17 of the CEA shall be registered as a national securities 
association for the limited purpose of regulating the activities of 
broker-dealers registered pursuant to Section 15(b)(11) of the 
Exchange Act, 15 U.S.C. 78o(b)(11), with respect to their activities 
in security futures products.
    \12\ Sections 6(g)(4)(B) and 15A(k)(3) of the Exchange Act, 15 
U.S.C. 78f(g)(4)(B) and 15 U.S.C. 78o-3(k)(3).
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    To implement the CFMA, the Commission proposed Rule 6a-4 and Form 
1-N and proposed conforming amendments to Rules 6a-2, 6a-3, and Rule 
202.3 of the Commission's procedural rules, which would establish the 
registration process for futures markets that wish to list and trade 
security futures products.\13\ In addition, the Commission proposed 
Rule 19b-7, Form 19b-7, and amendments to Rule 19b-4 and Form 19b-4 to 
set forth the process for Security Futures Product Exchanges and 
Limited Purpose National Securities Associations to file proposed rule 
changes.\14\
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    \13\ See Securities Exchange Act Release No. 44279 (May 8, 
2001), 66 FR 26978 (May 15, 2001) (``Proposing Release'').
    \14\ Id.
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    In response to the Proposing Release, the Commission received four 
comment letters.\15\ As discussed below, the Commission is adopting 
Rule 6a-4 and Form 1-N with slight modifications, and the amendments to 
Rules 6a-2 and 6a-3 and Rule 202.3 of the Commission's procedural rules 
substantially as proposed. In addition, the Commission is adopting Rule
19b-7, Form 19b-7, and amendments to Rule 19b-4 and Form 19b-4, with 
modifications, in response to recommendations made by commenters. 
Finally, the Commission is requesting public comment on whether the 
Commission should adopt changes to Rule 19b-7 and Form 19b-7 if the 
Commission were to adopt proposed Rule 19b-6 and proposed Form 19b-6.
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    \15\ See letters to Jonathan G. Katz, Secretary, Commission, 
from Edward J. Joyce, President and Chief Operating Officer, Chicago 
Board Options Exchange, Inc., dated June 13, 2001 (``CBOE Letter''); 
Daniel J. Roth, Senior Executive Vice President, Chief Operating 
Officer, and General Counsel, National Futures Association, dated 
June 14, 2001 (``NFA Letter''); David J. Vitale, President and Chief 
Executive Officer, Chicago Board of Trade, dated June 14, 2001 
(``CBOT Letter''); and Jerrold E. Salzman, Freeman, Freeman & 
Salzman, P.C., dated June 14, 2001 (``CME Letter'').
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II. Notice Registration of Security Futures Product Exchanges

A. Background

    Section 6(g)(2)(A) of the Exchange Act\16\ provides that an 
exchange required to register with the Commission only because it lists 
or trades security futures products may register with the Commission by 
filing a written notice in such form as the Commission may, by rule, 
prescribe as necessary or appropriate in the public interest or for the 
protection of investors. Such rule may require that the written notice 
contain the rules of the exchange and other information and documents 
concerning the exchange, comparable to the information and documents 
the Commission requires for national securities exchanges registered 
under section 6(a) of the Exchange Act.\17\ Pursuant to section 
6(g)(2)(B) of the Exchange Act,\18\ such ``notice

[[Page 43723]]

registration'' would be effective contemporaneously with the submission 
of the written notice, unless the registration were subject to 
suspension or revocation by the CFTC.\19\
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    \16\ 15 U.S.C. 78f(g)(2)(A).
    \17\ 15 U.S.C. 78f(a).
    \18\ 15 U.S.C. 78f(g)(2)(B).
    \19\ Pursuant to its authority under the CEA, the CFTC may 
suspend or revoke the registration of boards of trade or other 
entities registered under the CEA. See 7 U.S.C. 7b.
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B. Discussion

1. Description of Proposed Rules
    Consistent with these provisions, the Commission proposed Rule 6a-4 
and Form 1-N, specifying the types of markets that could register as 
national securities exchanges, solely for the purposes of trading 
security futures products, and the information such markets would have 
to provide to the Commission. The Commission also proposed to amend 
Exchange Act Rules 6a-2 and 6a-3 \20\ to exclude Security Futures 
Product Exchanges from the requirements of those rules. Finally, the 
Commission proposed to add a new provision to Rule 202.3 of its 
procedural rules \21\ to indicate that Form 1-N filings would be routed 
to the Commission's Division of Market Regulation, which would be 
permitted to return a defective filing or hold it until corrected.
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    \20\ 17 CFR 240.6a-2 and 240.6a-3.
    \21\ 17 CFR 202.3.
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    As discussed below, the Commission is adopting Rule 6a-4 and Form 
1-N, with slight modifications, in response to concerns raised by 
commenters. The Commission also is adopting amendments to Exchange Act 
Rules
6a-2 and 6a-3,\22\ and Rule 202.3 of the Commission's procedural 
rules,\23\ substantially as proposed.
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    \22\ 17 CFR 240.6a-2 and 240.6a-3.
    \23\ 17 CFR 202.3.
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    The Commission received two comment letters \24\ regarding these 
proposals. Both commenters were critical of the Commission's proposal, 
arguing that it would not result in a level playing field between 
futures markets and securities markets. One commenter took the view 
that the process proposed by the Commission would be notice 
registration in name only, because it would require the same effort and 
expense as an application for registration as a national securities 
exchange.\25\ This commenter further stated that the proposed 
requirements would require a wasteful duplication of information that 
futures markets have already filed with the CFTC, and urged the 
Commission to adopt the same standards and procedures proposed by the 
CFTC for its notice registration process. The second commenter added 
that the amount of information that the Commission would require from 
Security Futures Product Exchanges was unnecessary and unduly 
burdensome because the CFTC was the primary regulator of these 
entities.\26\
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    \24\ See CBOT Letter and CME Letter.
    \25\ See CME Letter.
    \26\ See CBOT Letter.
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    In proposing Rule 6a-4 and Form
1-N, the Commission was sensitive to the fact that markets trading 
security futures products would, pursuant to the regulatory framework 
set forth in the CFMA, be subject to the jurisdiction of both the 
Commission and the CFTC. However, as the second commenter 
acknowledges,\27\ Section 6(g)(2)(A) of the Exchange Act specifically 
grants to the Commission the authority to require a Security Futures 
Product Exchange to provide information ``comparable to the information 
and documents required for national securities exchanges under Section 
6(a)'' of the Exchange Act.\28\ Accordingly, proposed Rule 6a-4 was 
closely modeled on Exchange Act Rules 6a-1, 6a-2, and 6a-3;\29\ and 
Form 1-N was closely modeled on Form 1, the application used to 
register as a national securities exchange pursuant to Section 6(a) of 
the Exchange Act.\30\ At the same time, Section 6(g)(2)(B) of the 
Exchange Act \31\ requires that the registration of an eligible futures 
market as a Security Futures Product Exchange will become effective 
contemporaneously with the submission of the required notice. Thus, 
although the Commission may require futures markets to submit 
information ``comparable'' to that required to be provided by the 
securities markets, the Exchange Act expressly prohibits the Commission 
from instituting an approval process with respect to such information.
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    \27\ See id.
    \28\ 15 U.S.C. 78f(g)(2)(A).
    \29\ 17 CFR 240.6a-1, 240.6a-2, and 240.6a-3.
    \30\ 15 U.S.C. 78f(a). Form 1 also may be used to apply for an 
exemption from exchange registration based on limited volume.
    \31\ 15 U.S.C. 78f(g)(2)(B).
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    The two commenters compared the burden imposed on Security Futures 
Product Exchanges to notice register with the Commission with the 
burden imposed on securities exchanges to become notice designated by 
the CFTC.\32\ The Commission believes, however, that a more appropriate 
comparison is between the requirements imposed by the Commission on 
Security Futures Product Exchanges and other national securities 
exchanges. In this regard, a futures market that wishes to become a 
national securities exchange pursuant to section 6(g) of the Exchange 
Act \33\ would be expected to provide significantly less information 
than would a securities market that wishes to become a national 
securities exchange pursuant to section 6(a) of the Exchange Act.\34\ 
Specifically, the Commission notes that a futures market that submits a 
Form 1-N would be required to provide information about its operations 
only to the extent that such information directly relates to its 
proposed trading of security futures products. Provided that all 
required information is filed with the Commission, the Security Futures 
Product Exchange's registration would be effective upon filing.
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    \32\ See CBOT Letter and CME Letter.
    \33\ 15 U.S.C. 78f(g).
    \34\ 15 U.S.C. 78f(a).
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    Furthermore, the Commission does not believe that its proposal 
would impose duplicative or unnecessary reporting requirements on 
Security Futures Product Exchanges. Section 6(g)(2)(A) of the Exchange 
Act \35\ specifically provides that a futures market seeking to 
register with the Commission as a Security Futures Product Exchange may 
submit to the Commission copies of documents that it has already filed 
with the CFTC, to the extent that such documents contain information 
satisfying the Commission's informational requirements.\36\ The 
Commission does not seek to dictate the form of filings made by futures 
markets, so long as the information required by the Commission is 
submitted. If a futures market has filed with the CFTC information 
required by the Form 1-N exhibits, discussed below, then the futures 
market may provide a copy of that filing to the Commission and identify 
the information relating to specified Form 1-N exhibit(s) that is 
included in the CFTC filing.\37\
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    \35\ 15 U.S.C. 78f(g)(2)(A).
    \36\ The Commission is adopting this statutory provision in Rule 
6a-4(b)(7), 17 CFR 240.6a-4(b)(7).
    \37\ However, information submitted in this manner would still, 
for most exhibits, have to be current within one month of the date 
that the futures market files its Form 1-N with the Commission. See 
Form 1-N.
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    For these reasons, the Commission has decided to adopt the 
procedures for notice registration of Security Futures Products 
Exchanges largely as proposed. However, in response to the comment 
letters, the Commission is modifying the original proposal, as 
discussed below, to further reduce the reporting burden on these 
entities.
2. Registration Requirements for Security Futures Product Exchanges 
Filing Form 1-N
    The Commission is adopting paragraph (a) of Rule 6a-4 as proposed. 
Specifically, a ``board of trade,'' as defined in the CEA,\38\ may 
register with

[[Page 43724]]

the Commission pursuant to section 6(g) of the Exchange Act by filing 
Form
1-N if: (i) It has been designated a contract market by the CFTC or is 
registered as a derivative transaction execution facility under section 
5a of the CEA; \39\ (ii) such designation or registration is not 
suspended by the CFTC;\40\ and (iii) such exchange does not serve as a 
market place for transactions in securities other than security futures 
products or futures on exempted securities or on groups or indexes of 
securities, or options thereon.\41\
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    \38\ See 7 U.S.C. 1a(2).
    \39\ 7 U.S.C. 7a.
    \40\ See Section 6(g)(1)(A) of the Exchange Act, 15 U.S.C. 
78f(g)(1)(A).
    \41\ 17 CFR 240.6a-4(a)(1).
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    The Commission also is adopting Form 1-N as proposed, with a 
modification to Exhibit G, in response to commenters' concerns, to 
clarify that the scope of information requested by the Commission is 
limited to that information which relates to the trading of security 
futures products.\42\ Form 1-N is not an application, and the 
Commission is not required to publish the notice for comment or to make 
specific determinations as to whether an exchange's systems, rules, and 
policies are consistent with the Exchange Act. Instead, Form 1-N will 
serve as a notice to the Commission that the exchange seeks to trade 
security futures products and will provide to the Commission 
information it needs to exercise its regulatory responsibilities. As 
adopted, Form 1-N consists of an execution page and nine exhibits, 
lettered A through I. In response to commenters' concerns,
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    \42\ 17 CFR 249.10.
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     Exhibit A requires a copy of an exchange's constitution, 
articles of incorporation or association with all subsequent 
amendments, and by-laws or corresponding rules.
     Exhibit B requires an exchange's written rulings, settled 
practices having the effect of rules,\43\ and interpretations of its 
governing board or other committee with respect to its rules, by-laws, 
constitution, or trading practices that are not included in Exhibit A.
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    \43\ For purposes of Exhibit B to Form 1-N, the Commission 
considers settled practices to be the policies of an exchange that 
are not otherwise covered in its written rulings.
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     Exhibit C requires basic information regarding any 
subsidiary, affiliate, or other related entity involved in the trading 
of security futures products.\44\
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    \44\ Specifically, Exhibit C requires for all such entities: the 
name and address of the organization; the form of the organization; 
the name of the state and statute citation under which organized; 
the date of incorporation in present form; a brief description of 
the nature and extent of affiliation; a brief description of 
business or functions; a copy of the constitution or articles of 
incorporation or association, including all amendments and existing 
by-laws or corresponding rules or instruments; the name and title of 
the present officers, governors, or persons performing similar 
functions; and an indication of whether such business or 
organization ceased to be associated with the exchange during the 
previous year and the reasons for such termination.
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     Exhibit D requires a narrative description of how trading 
is carried out on the exchange's trading system.\45\ Exhibit D also 
requires the exchange to submit a copy of the trading system users' 
manual.
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    \45\ This description must include: the means of access to the 
system; the procedures governing entry and display of quotations and 
orders in the system; the procedures governing the execution, 
reporting, clearance, and settlement of transactions in connection 
with the system; proposed fees; the procedures for ensuring 
compliance with system usage guidelines; the hours of operation of 
the system; and the date on which the exchange intends to commence 
operation of the system. The exchange is not required to submit 
technical specifications for the system.
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     Exhibit E requires general information regarding an 
exchange's officers, governors, or persons performing similar functions 
during the previous year.\46\
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    \46\ For such persons, the exchange is required to provide the 
name, title, dates of commencement and termination of term of office 
or position, and type of business in which each is primarily 
engaged.
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     Exhibit F requires the exchange to provide certain 
information regarding an exchange's ownership.\47\
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    \47\ Exhibit F applies only to exchanges that have one or more 
owners, shareholders, or partners who are not also members of the 
exchange. An exchange that is a corporation is required to list each 
shareholder that directly owns 5% or more of any class of the 
exchange's voting securities. If the exchange is a partnership, it 
is required to list all general partners and those limited and 
special partners who have the right to receive upon dissolution, or 
have contributed, 5% or more of the partnership's capital. For these 
persons, the exchange is required to list the full legal name, title 
or status, the date the title or status was acquired, approximate 
ownership interest, and whether the person has control (as defined 
in the instruction to Form 1-N).
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     Exhibit G requires a description of an exchange's criteria 
for membership, including conditions under which members may be subject 
to suspension or termination, and any procedures that would be involved 
in the suspension or termination of a member. Exhibit G applies only to 
the extent that the exchange has not provided such information pursuant 
to Exhibit A. As noted above, the Commission is modifying Exhibit G 
slightly from its proposal to clarify that the scope of information 
requested is limited to that information which relates to the 
exchange's members that trade security futures products.
     Exhibit H requires certain information relating to an 
exchange's members, participants, subscribers, or other users.\48\ One 
commenter stated that it was unclear whether this proposed requirement 
would relate to all persons who have direct access to the exchange or 
to all customers, noting that in some instances these two categories of 
persons could be the same.\49\ The commenter also noted that lists of 
registered terminal operators authorized to enter trades into 
electronic trading systems may be subject to frequent change, and that 
the Commission should not require such information in the first 
instance. In response to this comment, the Commission notes that 
Exhibit H does not seek to obtain information regarding customers. 
Instead, the Commission is requesting information only about members 
and other persons with whom the market has a contractual relationship. 
The Commission does not believe that it is necessary to modify Exhibit 
H and is adopting it as proposed.
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    \48\ Specifically, Exhibit H requires the following information: 
name; if such user is an individual, the name of the entity with 
which such individual is associated and the relationship of such 
individual to the entity; a brief description of the type of 
activities primarily engaged in by the member, participant, 
subscriber, or user; and the class of membership, participation, or 
other access.
    \49\ See CBOT Letter.
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     Exhibit I requires a schedule of the security futures 
products that the exchange proposes to list, indicating for each the 
name of the issuer and a description of the security.
    An exchange filing Form 1-N is required to submit the information 
required by Exhibits A, B, C, F, and H current as of the latest date 
practicable within one month of the date that it files Form 1-N. In 
addition, if an exchange discovers that any information filed on Form 
1-N was inaccurate when filed, it must promptly submit an amendment 
that corrects the inaccuracy.\50\
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    \50\ Rule 6a-4(a)(2), 17 CFR 240.6a-4(a)(2).
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3. Filing of Periodic Amendments
    a. Amendments in Case of Inaccurate or Incomplete Information. The 
Commission is adopting paragraph (b)(1) of Rule 6a-4 with slight 
modifications to the proposal.\51\ As proposed, this provision would 
have required an exchange to file an amendment to Form 1-N if any 
action were taken that rendered inaccurate, or that caused to be 
incomplete, any information filed on the execution page of Form 1-N or 
any information filed as part of Exhibits C, E, F, or H. A Security 
Futures Product Exchange would have been required to file such an

[[Page 43725]]

amendment within 10 days of the action in question.
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    \51\ 17 CFR 240.6a-4(b)(1).
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    One commenter argued, as a preliminary matter, that such amendments 
should be required only with respect to material inaccuracies.\52\ The 
commenter further suggested that the 10-day period should instead be at 
least 30 days, because a 30-day timeframe would be consistent with the 
requirement that information filed in the Form 1-N need be current only 
within one month of the date of filing. Moreover, the commenter noted 
that, on designated contract markets where memberships are held in the 
name of individuals, the markets' membership lists may change multiple 
times each month. Similarly, lists of registered terminal operators 
authorized to enter trades into electronic trading systems may be 
subject to frequent change. The commenter argued, therefore, that it 
would be particularly burdensome for Security Futures Product Exchanges 
to update Exhibits F and H within 10 days, and that annual resubmission 
of Exhibits F and H should be sufficient. The commenter urged the 
Commission not to require piecemeal amendments every time one 
individual is added to, or removed from, one of the categories of 
information covered by the exhibits.
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    \52\ See CBOT Letter.
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    In response to this comment and to the general comments discussed 
above,\53\ Rule 6a-4(b)(1) as adopted does not require Security Futures 
Product Exchanges to submit updates to Exhibits C, E, or H within 10 
days after actions render such information inaccurate or incomplete. In 
addition, the Commission is adopting a 30-day time period in which 
Security Futures Product Exchanges must update information on Exhibit 
F. Specifically, Rule 6a-4(b)(1), as adopted, requires a Security 
Futures Product Exchange to submit to the Commission updates to the 
execution page within 10 days and to submit updates to the information 
provided in Exhibit F within 30 days, after any action renders it 
inaccurate or incomplete. While the Commission believes that 30 days, 
rather than 10 days, is an appropriate timeframe for an exchange to 
update information on Exhibit F, the Commission believes that it is 
essential to the Commission's ability to fulfill its obligations under 
the Exchange Act for the basic information on the execution page to be 
complete and accurate at all times.
---------------------------------------------------------------------------

    \53\ See supra notes 24-37 and accompanying text.
---------------------------------------------------------------------------

    Finally, because the Commission has determined not to require the 
information in Exhibits C, E, and H to be updated within 10 days of 
becoming inaccurate, the Commission instead is adopting a requirement 
that Security Futures Product Exchanges provide the information 
required in Exhibits C and E upon request by the Commission and the 
public.\54\ Security Futures Product Exchanges must maintain records 
relating to changes in information in Exhibits C and E as of the latest 
practicable date but, at a minimum, such information must be up-to-date 
within 30 days.
---------------------------------------------------------------------------

    \54\ Rule 6a-4(b)(2), 17 CFR 240.6a-4(b)(2).
---------------------------------------------------------------------------

    b. Other Periodic Updates. The Commission received no comments on 
its proposed requirements that every Security Futures Product Exchange 
periodically file, as an amendment to Form 1-N, certain information, 
regardless of whether that information has changed since the previous 
filing, and is adopting them as proposed. Specifically, every Security 
Futures Product Exchange must file updates of Exhibits F, H, and I on 
or before June 30, 2002, and by June 30 every year thereafter,\55\ and 
Exhibits A, B, C, and E on or before June 30, 2004, and by June 30 
every three years thereafter.\56\ The information must be current as of 
the latest date practicable within three months of the date the 
Security Futures Product Exchange files the amendment. These 
requirements are designed to ensure that the Commission receives 
accurate and updated information about Security Futures Product 
Exchanges so that it may carry out its regulatory responsibilities.
---------------------------------------------------------------------------

    \55\ Rule 6a-4(b)(3), 17 CFR 240.6a-4(b)(3).
    \56\ Rule 6a-4(b)(4), 17 CFR 240.6a-4(b)(4).
---------------------------------------------------------------------------

    c. Exemption from Requirement to File Paper Copies of All Exhibits. 
The Commission is adopting Rule 6a-4(b)(5), which permits a Security 
Futures Product Exchange `` in lieu of providing paper amendments to 
Exhibits A, B, C, E, F, H, and I `` to meet the obligation to update 
this information through certain alternate means. Under this provision, 
a Security Futures Product Exchange may provide responsive information 
that was available in a publication that is issued on an annual or more 
frequent basis.\57\ Another alternative available to a Security Futures 
Product Exchange is to make the responsive information available to the 
Commission and to the public upon request.\58\ Finally, a Security 
Futures Product Exchange may make the responsive information available 
on a web site.\59\
---------------------------------------------------------------------------

    \57\ To avail itself of this option, the Security Futures 
Product Exchange must identify to the Commission the name of such 
publication; the name, address, and telephone number of the person 
from whom it may be obtained; and the publication's price. The 
exchange also must certify to the accuracy of such information as of 
its publication date. Rule 6a-4(b)(5)(i), 17 CFR 240.6a-4(b)(5)(i).
    \58\ To avail itself of this option, the Security Futures 
Product Exchange must certify that this information is kept up-to-
date and is available to the Commission and to the public upon 
request. Rule 6a-4(b)(5)(ii), 17 CFR 240.6a-4(b)(5)(ii).
    \59\ To avail itself of this option, the Security Futures 
Product Exchange must control the web site and the responsive 
information must be continuously available on it. The Security 
Futures Product Exchange also must indicate to the Commission the 
location of the web site where the information may be found and 
certify that the information available there is accurate as of the 
date that the exchange submits such certification. Rule 6a-
4(b)(5)(iii), 17 CFR 240.6a-4(b)(5)(iii).
---------------------------------------------------------------------------

    The Commission received one comment relating to the proposed 
alternate means of updating information.\60\ This commenter 
acknowledged that the Commission's proposals represented useful 
attempts to reduce the burden on Security Futures Product Exchanges of 
filing amendments to Form 1-N. However, the commenter stated that these 
provisions would not be helpful because much of the information 
required by the exhibits is generally not made available to the public 
through an exchange's web site, its publications, or otherwise.
---------------------------------------------------------------------------

    \1\ See CBOT Letter.
---------------------------------------------------------------------------

    The Commission believes, nevertheless, that these alternate means 
of providing updates of certain required information will relieve much 
of the burden faced by those exchanges that currently, or choose in the 
future to, make this information available through these alternative 
means. Notably, a Security Futures Product Exchange may never have to 
file paper updates of the exhibits to Form 1-N, provided it makes the 
information available by one of the alternate means discussed above. 
Moreover, the Commission notes that these provisions were originally 
developed to alleviate the burden on national securities exchanges as 
they update Form 1. The Commission is extending these provisions to 
Security Futures Product Exchanges that now must file and update Form 
1-N to ensure that Security Futures Product Exchanges are permitted to 
rely upon alternate means of compliance to the same extent as other 
national securities exchanges.
4. Filing of Supplemental Material
    a. Material Issued to Members, Participants, or Subscribers. The 
Commission is adopting Rule 6a-4(c)(1) \61\ as proposed. Under this 
provision, a Security Futures Product Exchange is required to file with 
the Commission any material related to the

[[Page 43726]]

trading of security futures products (including notices, circulars, 
bulletins, lists, and periodicals) that is issued or made generally 
available to members of, participants in, or subscribers to, the 
exchange. This material must be filed within 10 days after the Security 
Futures Product Exchange issues it or makes it generally available. In 
lieu of making a hardcopy submission, a Security Futures Product 
Exchange may comply with this requirement by indicating the location of 
an Internet web site where such information may be found and certifying 
that the information available at that location is accurate as of the 
date that the exchange submits such certification. To avail itself of 
this option, the Security Futures Product Exchange must control the web 
site and the responsive information must be continuously available on 
it.
---------------------------------------------------------------------------

    \61\ 17 CFR 240.6a-4(c)(1).
---------------------------------------------------------------------------

    One commenter stated that Security Futures Product Exchanges should 
not be required to provide the Commission with copies of all of these 
supplemental materials on a continuing basis.\62\ This commenter added 
that, if the Commission insisted on requiring submission of these 
items, then Security Futures Product Exchanges should be allowed 30 
rather than 10 days to report them. The commenter also suggested that 
Security Futures Product Exchanges be permitted to fulfill the 
supplemental information requirement by making such information 
available on a web site.
---------------------------------------------------------------------------

    \62\ See CBOT Letter.
---------------------------------------------------------------------------

    From its experience with requiring such information from existing 
national securities exchanges, the Commission does not believe that the 
10-day requirement in which to provide the supplemental materials is 
unduly burdensome. Furthermore, the Commission notes that its proposal, 
as well as its final rule, permits Security Futures Product Exchanges 
to fulfill this requirement by making the supplemental material 
available on a web site. b.
    b. Trading Reports. The Commission received no comments on Rule 6a-
4(c)(2) \63\ and is adopting it with minor changes to the language in 
the rule to clarify the information that must be reported. Rule 6a-
4(c)(2) requires every Security Futures Product Exchange to file a 
report within 15 days after the end of each calendar month concerning 
the security futures products traded on that exchange during the 
previous calendar month. The report must include: (1) for each contract 
of sale for future delivery of a single security, the number of 
contracts traded on the exchange during the relevant calendar month and 
the total number of shares underlying such contracts traded; and (2) 
for each contract of sale for future delivery of a narrow-based 
security index, the number of contracts traded on the exchange during 
the relevant calendar month and the total number of shares represented 
by the index underlying such contracts traded.
---------------------------------------------------------------------------

    \63\ 17 CFR 240.6a-4(c)(2).
---------------------------------------------------------------------------

5. Exemption From Requirement To Update Exhibit C
    The Commission is adopting a proposed provision to permit a 
Security Futures Product Exchange to request an exemption from the 
requirement that it update Exhibit C to its Form 1-N with respect to 
one of its affiliates or subsidiaries if another national securities 
exchange lists that entity in Exhibit C to its Form 1 or Form 1-N. The 
Commission is adopting this provision as proposed.\64\
---------------------------------------------------------------------------

    \64\ Rule 6a-4(b)(6)(i)(A), 17 CFR 240.6a-4(b)(6)(i)(A).
---------------------------------------------------------------------------

    The Commission also is adopting a provision that permits a Security 
Futures Product Exchange to request an exemption from the requirement 
that it update Exhibit C to its Form 1-N with respect to an inactive 
subsidiary or affiliate if such subsidiary or affiliate has been 
inactive throughout the subsidiary's or affiliate's latest fiscal 
year.\65\ As proposed, the exemption would have been available only to 
inactive subsidiaries of a Security Futures Product Exchange. The rule, 
as amended, makes the exemption available to inactive affiliates, as 
well. The Commission generally believes that no regulatory purpose 
would be served by requiring a Security Futures Product Exchange to 
file updates with respect to such inactive entities.
---------------------------------------------------------------------------

    \65\ Rule 6a-4(b)(6)(i)(B), 17 CFR 240.6a-4(b)(6)(i)(B).
---------------------------------------------------------------------------

6. Proposed Amendments to Exchange Act Rules 6a-2 and 6a-3
    Rules 6a-2 and 6a-3 under the Exchange Act \66\ set forth the 
ongoing filing requirements for registered or exempted exchanges that 
file applications with the Commission to become national securities 
exchanges pursuant to Rule 6a-1.\67\ Because the Commission is adopting 
new Rule 6a-4, which incorporates the relevant provisions of Rules 6a-2 
and 6a-3 that relate to filing obligations of Security Futures Product 
Exchanges, the Commission is adopting amendments to Rules 6a-2 and 6a-
3, as proposed, to exempt Security Futures Product Exchanges from the 
requirements of these rules.
---------------------------------------------------------------------------

    \66\ 17 CFR 240.6a-2 and 240.6a-3.
    \67\ 17 CFR 240.6a-1.
---------------------------------------------------------------------------

7. Processing of Form 1-N
    The Commission proposed to amend paragraph (b) of Rule 202.3 of the 
Commission's procedural rules \68\ to accommodate proposed Form 1-N. 
Specifically, the Commission proposed to add a new paragraph (b)(3), 
which would provide that notices for registration as a national 
securities exchange filed with the Commission pursuant to section 
6(g)(1) of the Exchange Act \69\ would be routed to the Division of 
Market Regulation, which would examine them to determine whether all 
necessary information had been supplied and whether all required 
documents had been furnished in proper form. The proposed amendment 
also would provide that the Division of Market Regulation could return 
defective filings with a request for correction or hold them until they 
are corrected.
---------------------------------------------------------------------------

    \68\ 17 CFR 202.3(b).
    \69\ 15 U.S.C. 78f(g)(1).
---------------------------------------------------------------------------

    The Commission received no comments on its proposed amendment to 
Rule 202.3 and is adopting this amendment with only one minor, 
technical revision. In the proposed amendment to Rule 202.3, the 
Commission on two occasions referred to Form 1-N filings as 
``applications.'' However, as noted above, Form 1-N is not an 
application and the Commission would not ``approve'' an exchange before 
it begins to trade security futures products. Therefore, new Rule 
202.3(b)(3) \70\ refers to these filings as ``notices.''
---------------------------------------------------------------------------

    \70\ 17 CFR 202.3(b)(3).
---------------------------------------------------------------------------

III. Procedures for Filing Proposed Rule Changes by Security 
Futures Product Exchanges and Limited Purpose National Securities 
Associations

A. Background

    Pursuant to section 19(b)(1) of the Exchange Act,\71\ all self-
regulatory organizations (``SROs'') are required to file with the 
Commission copies of any proposed rule, or any addition to or deletion 
from the rules of such SRO (``proposed rule change''). National 
securities exchanges registered pursuant to section 6(g) of the 
Exchange Act \72\ and limited purpose national securities associations 
registered pursuant to Section 15A(k) of the Exchange Act \73\ are SROs 
as defined by section 3(a)(26) of the Exchange Act.\74\ Security 
Futures

[[Page 43727]]

Product Exchanges and Limited Purpose National Securities Associations 
are exempt from submitting proposed rule changes pursuant to section 
19(b) of the Exchange Act,\75\ except in the three circumstances 
described below.
---------------------------------------------------------------------------

    \71\ 15 U.S.C. 78s(b)(1).
    \72\ 15 U.S.C. 78f(g).
    \73\ 15 U.S.C. 78o-3(k).
    \74\ 15 U.S.C. 78c(a)(26).
    \75\ 15 U.S.C. 78s(b).
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1. Proposed Rule Changes that Relate to Margin
    First, Security Futures Product Exchanges and Limited Purpose 
National Securities Associations are required to submit to the 
Commission proposed rule changes that relate to margin, except for 
those that result in higher margin levels, under sections 19(b)(1) and 
(b)(2) of the Exchange Act.\76\ These are the statutory provisions 
under which all SROs currently file proposed rule changes with the 
Commission. Section 19(b)(1) of the Exchange Act requires that proposed 
rule changes be accompanied by a concise general statement of the basis 
and purpose of the proposed rule change. Upon filing, the Commission is 
directed to publish notice of such proposed rule change, together with 
the terms of substance or description of the subjects and issues 
involved, and give interested persons the opportunity to submit 
comments on the proposed rule change. Finally, section 19(b)(1) of the 
Exchange Act states that proposed rule changes are not effective unless 
approved by the Commission or otherwise permitted in accordance with 
the provisions of section 19(b).\77\ Section 19(b)(2) of the Exchange 
Act sets forth the standards by which the Commission must determine 
whether a proposed rule change submitted pursuant to section 19(b)(1) 
of the Exchange Act must be either approved or disapproved. 
Specifically, the Commission is directed to approve a proposed rule 
change if it finds that such proposed rule change is consistent with 
the requirements of the Exchange Act and the rules and regulations 
thereunder applicable to such SRO or to disapprove a proposed rule 
change if it cannot make such a finding.
---------------------------------------------------------------------------

    \76\ Sections 6(g)(4)(B)(ii), 15 U.S.C. 78f(g)(4)(B)(ii); 
15A(k)(3)(B), 15 U.S.C. 78o-3(k)(3)(B); 15 U.S.C. 78s(b)(1) and 
(b)(2).
    \77\ Section 19(b)(3) of the Exchange Act sets forth the 
categories of proposed rule changes that may take effect upon filing 
with the Commission. 15 U.S.C. 78s(b)(3).
---------------------------------------------------------------------------

2. Other Proposed Rule Changes Related to Security Futures Products
    Second, proposed rule changes by Security Futures Product Exchanges 
and Limited Purpose National Securities Associations that relate to 
higher margin levels, fraud or manipulation, recordkeeping, reporting, 
listing standards, or decimal pricing for security futures products, 
sales practices for security futures products for persons who effect 
transactions in security futures products, or rules effectuating such 
SRO's obligation to enforce the securities laws must be submitted to 
the Commission pursuant to new section 19(b)(7) of the Exchange 
Act.\78\ Specifically, section 19(b)(7)(A) of the Exchange Act is 
similar to the current rule filing requirements, set forth in section 
19(b)(1) of the Exchange Act, in that it requires that a proposed rule 
change filed pursuant to this section contain a concise general 
statement of the basis and purpose of the proposed change. Similarly, 
upon such filing, the Commission is required to promptly publish notice 
of such proposed rule change and provide interested persons with the 
opportunity to submit comments.
---------------------------------------------------------------------------

    \78\ Sections 6(g)(4)(B)(i), 15 U.S.C. 78f(g)(4)(B)(i), and 
15A(k)(3)(A), 15 U.S.C. 780-3(k)(3)(A). Section 19(b)(7) of the 
Exchange Act grants to the Commission the authority to adopt rules 
regarding the filing of proposed rule changes by Security Futures 
Product Exchanges and Limited Purpose National Securities 
Associations. 15 U.S.C. 78s(b)(7).
---------------------------------------------------------------------------

    Section 19(b)(7)(B) of the Exchange Act sets forth the requirements 
according to which a proposed rule change that is submitted pursuant to 
section 19(b)(7)(A) of the Exchange Act \79\ may take effect. Section 
19(b)(7)(B) of the Exchange Act differs from the process that applies 
to existing SROs, set forth in Section 19(b)(2) of the Exchange Act, by 
requiring the concurrent submission of the proposed rule change to the 
CFTC. In addition, section 19(b)(7)(B) of the Exchange Act, instead of 
requiring Commission approval of a proposed rule change submitted 
pursuant to section 19(b)(7)(A) of the Exchange Act, provides that a 
proposed rule change, upon filing with the Commission and the CFTC, may 
take effect when: (i) A written certification has been filed with the 
CFTC under section 5c(c) of the CEA; \80\ (ii) the CFTC determines that 
review of the proposed rule change is not necessary; or (iii) the CFTC 
approves the proposed rule change.
---------------------------------------------------------------------------

    \79\ 15 U.S.C. 78s(b)(7)(A).
    \80\ 7 U.S.C. 7a-2(c). Pursuant to Section 5c(c) of the CEA, a 
registered entity may elect to approve and implement any new rule or 
rule amendment by providing the CFTC with a written certification 
that the new rule or rule amendment complies with the CEA.
---------------------------------------------------------------------------

    The CFMA also added Section 19(b)(7)(C) to the Exchange Act,\81\ 
which grants to the Commission, after consultation with the CFTC, the 
authority to summarily abrogate a proposed rule change that has taken 
effect pursuant to section 19(b)(7)(B) of the Exchange Act \82\ if it 
appears to the Commission that such rule change unduly burdens 
competition or efficiency, conflicts with the securities laws, or is 
inconsistent with the public interest and the protection of 
investors.\83\ In the event that this occurs, Security Futures Product 
Exchanges and Limited Purpose National Securities Associations would be 
required, pursuant to sections 6(g)(4)(B)(iii) \84\ and 15A(k)(3)(C) 
\85\ of the Exchange Act, respectively, to refile the proposed rule 
change pursuant to the requirements of section 19(b)(1) of the Exchange 
Act.
---------------------------------------------------------------------------

    \81\ 15 U.S.C. 78s(b)(7)(C).
    \82\ 15 U.S.C. 78s(b)(7)(B). Pursuant to this section, 
Commission action to abrogate a rule change will not affect the 
validity or force of the rule change during the period it was in 
effect.
    \83\ The Commission notes that it currently exercises similar 
abrogation authority pursuant to Section 19(b)(3)(C) of the Exchange 
Act, 15 U.S.C. 78s(b)(3)(C), with respect to proposed rule changes 
filed by the existing SROs that are immediately effective upon 
filing pursuant to Section 19(b)(3)(A) of the Exchange Act, 15 
U.S.C. 78s(b)(3)(A).
    \84\ 15 U.S.C. 78f(g)(4)(B)(iii).
    \85\ 15 U.S.C. 78o-3(k)(3)(C).
---------------------------------------------------------------------------

3. Proposed Rule Changes that Have Been Abrogated
    Finally, as just mentioned above, proposed rule changes that have 
been abrogated by the Commission must be refiled under section 19(b)(1) 
of the Act.\86\ Section 19(b)(7)(D) of the Exchange Act \87\ sets forth 
the Commission's timing requirements and standards for review of 
proposed rule changes that have been abrogated pursuant to section 
19(b)(7)(C) of the Exchange Act and refiled pursuant to section 
19(b)(1) of the Exchange Act. Specifically, the Commission must, within 
35 days of the date of publication of notice of the filing of the 
proposed rule change, or within such longer period as the Commission 
may designate up to 90 days after such date if the Commission finds 
such longer period to be appropriate and publishes its reasons for so 
finding, or as to which the SRO consents, either by order approve the 
proposed rule change or, after consultation with the CFTC, institute 
disapproval proceedings.\88\
    The standard by which the Commission determines whether to approve 
a proposed rule change that has been abrogated pursuant to section 
19(b)(7)(C) differs from the standard used by the Commission to 
consider

[[Page 43728]]

whether a proposed rule change filed under section 19(b)(1) of the 
Exchange Act should be approved. Specifically, section 19(b)(7)(D)(ii) 
of the Exchange Act \89\ states that the Commission must approve a 
proposed rule change that has been abrogated and refiled under section 
19(b)(1) of the Exchange Act if the Commission finds that it does not 
unduly burden competition or efficiency, does not conflict with the 
securities laws, and is not inconsistent with the public interest or 
the protection of investors.
---------------------------------------------------------------------------

    \86\ 15 U.S.C. 78s(b)(1).
    \87\ 15 U.S.C. 78s(b)(7)(D).
    \88\ The Commission notes that this is similar to the system 
currently in place for SRO filings, except for the CFTC's role and 
the approval standard to be applied by the Commission.
    \89\ 15 U.S.C. 78s(b)(7)(D)(ii).
---------------------------------------------------------------------------

B. Discussion

1. Description of Proposed Rules
    In the Proposing Release, the Commission proposed rules and forms, 
as well as amendments to existing rules and forms, to implement the 
CFMA's requirements regarding proposed rule changes filed by Security 
Futures Product Exchanges and Limited Purpose National Securities 
Associations. First, the Commission proposed to use Form 19b-4 for 
proposed rule changes that relate to margin, except for changes that 
result in higher margin levels. The Commission also proposed amendments 
to Rule 19b-4 \90\ and Form 19b-4 \91\ to establish procedures for the 
filing and approval of proposed rule changes that take effect under 
section 19(b)(7)(B) of the Exchange Act but are subsequently abrogated 
by the Commission, pursuant to section 19(b)(7)(C) of the Exchange 
Act.\92\ Finally, the Commission proposed Rule 19b-7 and Form 19b-7 to 
establish procedures for filing proposed rule changes pursuant to 
section 19(b)(7) of the Exchange Act.
---------------------------------------------------------------------------

    \90\ 17 CFR 240.19b-4.
    \91\ 17 CFR 249.819.
    \92\ 15 U.S.C. 78s(b)(7)(C). The Commission also proposed a 
technical amendment to paragraph (a) of Rule 19b-4 and Part A of 
Form 19b*ndash;4 to exclude from the requirement that SROs file 
proposed rule changes on Form 19b-4 those proposed rule changes 
submitted pursuant to Section 19(b)(7) of the Exchange Act.
---------------------------------------------------------------------------

    After carefully considering the comment letters,\93\ the Commission 
has decided to adopt the amendments to Rule 19b-4 and Form 19b-4 as 
proposed. In addition, the Commission is adopting Rule 19b-7 and Form 
19b-7 with modifications that respond to concerns raised by commenters 
and to make the rule and form more closely comparable to the current 
rule filing process.
---------------------------------------------------------------------------

    \93\ See supra note 15.
---------------------------------------------------------------------------

    In response to these proposals, all of the commenters noted the 
differences between the rule filing processes of the Commission and the 
CFTC.\94\ One commenter argued that the rule filing process proposed by 
the Commission was significantly more time-consuming and detailed than 
the process for proposed rule changes filed with the CFTC.\95\ This 
commenter argued that copies of submissions made to the CFTC under the 
CEA are sufficient to meet the requirements of Section 19(b)(7) of the 
Exchange Act and should be considered sufficient for filing with the 
Commission. This commenter recognized, however, that some of the more 
detailed requirements imposed by proposed Rule 19b-7 and proposed Form 
19b-7 are dictated by the publication requirements that are imposed by 
the Exchange Act, but not the CEA, and therefore, the commenter did not 
object to the Commission's proposals.
---------------------------------------------------------------------------

    \94\ See supra note 15.
    \95\ See NFA Letter.
---------------------------------------------------------------------------

    The differences noted by the commenters between the Commission's 
SRO rule filing process and that of the CFTC are the direct result of 
the different statutory mandates under which each agency operates. 
Unlike Section 19(b) of the Exchange Act, Section 5c of the CEA does 
not direct the CFTC to publish or solicit comment on rules or rule 
amendments of registered entities.\96\ Rather, section 5c(c)(1) of the 
CEA states that a registered entity may elect to approve and implement 
any new rule or rule amendment by providing the CFTC with a written 
certification that the new rule or rule amendment complies with the 
CEA. A registered entity may, pursuant to section 5c(c)(2)(A) of the 
CEA, seek prior approval from the CFTC of a new rule or rule amendment. 
Section 5c(c)(2)(B) of the CEA does require prior approval of new rules 
or rule amendments that materially change the terms and conditions of 
any contract of sale, if the amendment applies to contracts already 
listed for trading that have open interest. Moreover, section 5c(c)(3) 
of the CEA directs the CFTC to approve any new rule or rule amendment, 
unless it finds that such rule or rule amendment would violate the CEA.
---------------------------------------------------------------------------

    \96\ A registered entity is defined in Section 1a(29) as a board 
of trade designated as a contract market under Section 5 of the CEA; 
a derivatives transaction execution facility registered under 
Section 5a of the CEA; a derivatives clearing organization 
registered under Section 5b of the CEA; and a board of trade 
designated as a contract market under Section 5f of the CEA. 7 
U.S.C. 1a.
---------------------------------------------------------------------------

    Clearly, the requirements of Section 5c of the CEA differ from the 
requirements set forth in Section 19(b) of the Exchange Act, which 
specifically requires the Commission to review, publish, and approve or 
institute proceedings to disapprove virtually all proposed rule changes 
of its SROs. The Commission cannot ignore its statutory mandate. The 
Commission, however, recognizes the evolving competitive landscape of 
the marketplace and is continuing to review its rule filing process. 
Nevertheless, at this time, the Commission believes that information 
required in Form 19b-7, as discussed below, is necessary for the 
Commission to fulfill its statutory obligations to fully implement the 
CFMA.
2. Proposed Rule Changes by Security Futures Product Exchanges and 
Limited Purpose National Securities Associations Related to Margin
    The Commission has decided to use Form 19b-4, as proposed, for 
proposed rule changes that relate to margin, except for those that 
result in higher margin. Security Futures Product Exchanges and Limited 
Purpose National Securities Associations are required to file these 
margin rule changes under sections 19(b)(1) and 19(b)(2) of the 
Exchange Act, which, as discussed above, are the statutory provisions 
under which existing SROs file proposed rule changes.\97\ Thus, no 
changes to either Rule 19b-4 or Form 19b-4 are needed to accommodate 
these proposed rule changes filed by Security Futures Product Exchanges 
and Limited Purpose National Securities Associations.
---------------------------------------------------------------------------

    \97\ Sections 6(g)(4)(B)(ii) and 15A(k)(3)(B) of the Exchange 
Act, 15 U.S.C. 78f(g)(4)(B)(ii) and 78o-3(k)(3)(B).
---------------------------------------------------------------------------

3. Proposed Rule Changes by Security Futures Product Exchanges and 
Limited Purpose National Securities Associations Required To Be Filed 
Under Section 19(b)(7) of the Exchange Act
    The Commission is adopting Rule 19b-7 and Form 19b-7 to establish 
procedures for filing proposed rule changes pursuant to section 
19(b)(7) of the Exchange Act.\98\ In the Proposing Release, the 
Commission proposed to model Rule 19b-7 and Form 19b-7 on proposed Rule 
19b-6 and proposed Form 19b-6 \99\ to incorporate the Commission's 
recent review of the SRO rule filing process. One commenter, however, 
questioned the appropriateness of using a process that only has been 
proposed for existing SROs and is still under consideration by

[[Page 43729]]

the Commission.\100\ This commenter noted that proposed Rule 19b-7 and 
Form 19b-7 could subject Security Futures Product Exchanges and Limited 
Purpose National Securities Associations to a different standard than 
existing SROs. The commenter also criticized the proposed Rule 19b-6 
process as adding many new requirements, delays, and conditions to 
proposed rule changes of existing SROs. In light of the fact that the 
Commission is still considering proposed Rule 19b-6 and Form 19b-6, the 
Commission has decided to modify Rule 19b-7 and Form 19b-7 to more 
closely resemble current Rule 19b-4 and Form 19b-4.
---------------------------------------------------------------------------

    \98\ 15 U.S.C. 78s(b)(7).
    \99\ The Commission recently published a proposal to replace 
Rule 19b-4 and Form 19b-4 with proposed Rule 19b-6 and proposed Form 
19b-6. See Securities Exchange Act Release No. 43860 (January 19, 
2001), 66 FR 8912 (February 5, 2001) (``Rule 19b-6 Proposing 
Release'').
    \100\ See CBOE Letter, which recommended ``the rules and forms 
for proposed rule changes should be identical for fully-registered 
national securities exchanges and 6(g) exchanges to the maximum 
extent possible.'' The CBOE also argued that the regulatory 
disparity between the rule filing processes imposed on the options 
exchanges, compared to those proposed for Security Futures Product 
Exchanges, would impose an unfair regulatory burden on the options 
exchanges. The CBOE noted that options exchanges are subject to a 
detailed Commission review process for virtually all proposed rule 
changes, while Security Futures Product Exchanges would be subject 
to Commission review only in specific enumerated circumstances, with 
most filings becoming effective upon filing. The CBOE recommended 
that the Commission modernize its SRO rule review process to reflect 
the rapidly changing, competitive, and global marketplace, including 
the regulatory disparity between futures exchanges and national 
securities exchanges. See also, CME Letter, incorporating by 
reference the comments in the CBOE Letter.
---------------------------------------------------------------------------

    Section 19(b) of the Exchange Act \101\ sets forth specific 
requirements for both the SROs and the Commission concerning proposed 
rule changes. As discussed above, Security Futures Product Exchanges 
and Limited Purpose National Securities Associations, upon notice 
registration with the Commission, become SROs for purposes of the 
Exchange Act. The CFMA, however, exempted Security Futures Product 
Exchanges and Limited Purpose National Securities Associations from 
submitting proposed rule changes pursuant to section 19(b) of the 
Exchange Act as other SROs are required to do, except in certain 
circumstances, and it established different rule filing requirements 
for certain proposed rule changes filed by these markets. The 
Commission believes that Rule 19b-7 and Form 19b-7, as adopted, reflect 
and implement the Exchange Act's requirements regarding proposed rule 
changes submitted to the Commission by Security Futures Product 
Exchanges and Limited Purpose National Securities Associations.
---------------------------------------------------------------------------

    \101\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------

    Specifically, Rule 19b-7 requires that proposed rule changes 
submitted to the Commission pursuant to section 19(b)(7) of the 
Exchange Act be made on Form 19b-7. In addition, Rule 19b-7 provides 
that a proposed rule change will not be deemed filed on the date it is 
received unless a completed Form 19b-7 is submitted and, in order to 
elicit meaningful comment, Form 19b-7 is accompanied by (i) a clear and 
concise statement of the basis and purpose of such rule change, 
including the impact on competition or efficiency, if any; and (ii) a 
summary of any written comments received by the SRO on the proposed 
rule change. The Commission notes that these requirements are 
substantially the same requirements that are required by Form 19b-
4.\102\ The Commission also has incorporated such language in the Form 
19b-7. The Commission has decided to include these requirements in Rule 
19b-7, as well as Form 19b-7, for clarity.
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    \102\ See Form 19b-4, General Instructions, B. Need for Careful 
Preparation of the Completed Form, Including Exhibits; Information 
to Be Included in the Completed Form; Item 3, Self-Regulatory 
Organization's Statement of the Purpose of, and Statutory Basis for, 
the Proposed Rule Change; and Item 5, Self-Regulatory Organization's 
Statement on Comments on the Proposed Rule Change Received from 
Members, Participants, or Others.
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    In addition, the Commission has added language to Rule 19b-7 to 
require Security Futures Product Exchanges and Limited Purpose National 
Securities Associations to retain at their principal places of business 
a file, available to interested persons for public inspection and 
copying, containing all filings made pursuant to Rule 19b-7 as well as 
all correspondence and other communications reduced to writing. This 
language is the same as language in Rule 19b-4 \103\ and also is 
incorporated in Forms 19b-4 \104\ and 19b-7.\105\
---------------------------------------------------------------------------

    \103\ See Rule 19b-4(i), 17 CFR 240.19b-4(i).
    \104\ See Form 19b-4, Exhibit 1, Item II, Self-Regulatory 
Organization's Statement of the Purpose of, and Statutory Basis for, 
the Proposed Rule Change; and Item IV, Solicitation of Comments.
    \105\ See Form 19b-7 Notice, Item II, Self-Regulatory 
Organization's Statement of the Purpose of, and Statutory Basis for, 
the Proposed Rule Change; and Item IV, Solicitation of Comments.
---------------------------------------------------------------------------

    Because the Commission has decided that Form 19b-7 should closely 
mirror the current rule filing procedures and requirements set forth in 
Form 19b-4, the Commission has decided not to adopt the proposed 
certification requirement. Proposed Form 19b-7 would have required a 
senior member of an exchange's or association's management to certify 
that the proposed rule change satisfied a number of requirements. The 
Commission agrees with commenters that the proposed certification 
requirement should not be part of Form 19b-7 at this time because it is 
not currently part of the rule filing requirements for existing 
SROs.\106\ Form 19b-7, however, requires the signature of a senior 
member of an exchange's or association's management, as is currently 
required by Form 19b-4, to represent that the information contained in 
Form 19b-7 is current, accurate, and complete.
---------------------------------------------------------------------------

    \106\ See CBOE Letter.
---------------------------------------------------------------------------

    In addition, the Commission is not adopting two requirements 
proposed in the Purpose section of proposed Form 19b-7. As adopted, 
Form 19b-7 does not require Security Futures Product Exchanges and 
Limited Purpose National Securities Associations to describe how the 
proposed rule change relates to any applicable provisions of the 
federal securities laws and the rules and regulations thereunder. Form 
19b-7 also does not require a Security Futures Product Exchange or a 
Limited Purpose National Securities Association to identify the 
provisions of the federal securities laws that the SRO reasonably 
expects the proposed rule change to affect, or to describe the 
anticipated effect of the proposed rule change on each applicable 
provision of the federal securities laws. In response to the concerns 
raised by a commenter,\107\ the Commission is not adopting these 
proposed provisions because they are not required of existing SROs in 
the current Form 19b-4.
---------------------------------------------------------------------------

    \107\ See CBOE Letter.
---------------------------------------------------------------------------

    Further, in response to a commenter,\108\ the Commission is adding 
language to Form 19b-7 to reflect the three events upon which a 
proposed rule change submitted under section 19(b)(7) of the Exchange 
Act may take effect pursuant to section 19(b)(7)(B) of the Exchange 
Act. The Commission had proposed to address only written certifications 
filed with the CFTC under section 5c(c) of the CEA. Specifically, in 
the opening paragraph of the Form 19b-7 notice, and Item III of the 
Form 19b-7 notice, the Commission is adding language to reflect that 
proposed rule changes submitted pursuant to section 19(b)(7) of the 
Exchange Act may take effect upon: (1) The filing of a written 
certification with the CFTC under section 5c(c) of the CEA; \109\ (2) a 
determination by the CFTC that review of the proposed rule change is 
not necessary; or (3) the CFTC's approval of the proposed rule change. 
In addition to Form 19b-7, a Security Futures Product Exchange or 
Limited Purpose National Securities Association is required to file 
with the Commission as Exhibit 5, discussed below, a copy of any 
written

[[Page 43730]]

certification filed with the CFTC pursuant to section 5c(c) of the CEA; 
a copy of any request submitted to the CFTC for a determination that 
review of the proposed rule change is not necessary and any indication 
from the CFTC that it has determined that review of the proposed rule 
change is not necessary; or a copy of any request submitted to the CFTC 
for approval of the proposed rule change and any indication received 
from the CFTC that the proposed rule change has been approved.
---------------------------------------------------------------------------

    \108\ See NFA Letter.
    \109\ 7 U.S.C. 7a-2(c).
---------------------------------------------------------------------------

    The Commission notes that it is adopting a shortened format of Form 
19b-4 for Form 19b-7. Specifically, Security Futures Product Exchanges 
and Limited Purposed National Securities Associations are required to 
prepare a cover page, five exhibits, and a Federal Register notice. The 
cover page includes the requirement, taken from Form 19b-4, that a 
senior member of the SRO's management sign the filing, to represent 
that the information contained in Form 19b-7 is current, accurate, and 
complete. The five exhibits each contain information that currently is 
required to be submitted in Form 19b-4. Exhibit 1 requires information 
to be submitted regarding comment letters received by the SRO, 
including the actual comment letters. Exhibit 2 requires copies of any 
form, report or questionnaire that the SRO proposes to use to help 
implement or operate the proposed rule change. Exhibit 3 requires the 
SRO to submit a statement that describes the procedures that have been 
taken with regard to the proposed rule change, including any vote of 
the SRO's board of directors or members. Exhibit 3 also requires the 
names and telephone numbers of the staff of the SRO who are prepared to 
respond to questions and comments on the proposed rule change. Exhibit 
4 requires that the SRO file the text of the proposed rule change. 
Finally, Exhibit 5 requires that a Security Futures Product Exchange or 
Limited Purpose National Securities Association submit copies of any 
certification, request for review, or request for approval filed with 
the CFTC concerning the proposed rule change, and any responses 
received from the CFTC. These documents are necessary for the 
Commission to determine the effectiveness of a proposed rule change in 
order to calculate the date by which the Commission must decide whether 
to abrogate a proposed rule change. The Commission believes that the 
shortened format adopted today reduces the filing burden on Security 
Futures Product Exchanges and Limited Purpose National Security 
Associations, while satisfying the requirements of the Exchange Act.
    One commenter suggested that Form 19b-7 be modified to limit the 
comment letters that are required to be submitted with the form to only 
substantive comments and communications regarding the version of the 
proposal that is filed with the Commission.\110\ According to the 
commenter, its rulemaking process can generate a number of drafting or 
editing comments from its members, and the commenter believes that 
providing comments on earlier drafts of proposed rules would not only 
be burdensome, but also, would be of little value to the Commission. In 
response to the commenter, the Commission clarifies that comments that 
address editing changes of earlier drafts of proposed rule changes need 
not be filed with the Commission.
---------------------------------------------------------------------------

    \110\ See NFA Letter.
---------------------------------------------------------------------------

4. Proposed Rule Changes Abrogated by the Commission and Refiled by a 
Security Futures Product Exchange or Limited Purpose National 
Securities Association
    As discussed above, the Commission has the authority to abrogate a 
proposed rule change that has become effective pursuant to Section 
19(b)(7)(B) of the Exchange Act if, after consultation with the CFTC, 
it appears to the Commission that the proposed rule change unduly 
burdens competition or efficiency, conflicts with the securities laws, 
or is inconsistent with the public interest and the protection of 
investors.\111\ The Commission is adopting amendments, as proposed, to 
Rule 19b-4 \112\ and Form 19b-4 to implement procedures to be used by 
Security Futures Product Exchanges and Limited Purpose National 
Securities Associations when filing proposed rule changes that were 
abrogated by the Commission and are being refiled pursuant to Section 
19(b)(1) of the Exchange Act.\113\
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    \111\ Section 19(b)(7)(C) of the Exchange Act, 15 U.S.C. 
78s(b)(7)(C).
    \112\ The Commission also is adopting a technical amendment to 
paragraph (a) of Rule 19b-4 and Part A of Form 19b-4 to exclude from 
the requirement that SROs file proposed rule changes on Form
19b-4 those proposed rule changes submitted pursuant to Section 
19(b)(7) of the Exchange Act. See Rule 19b-4 and Form 19b-4.
    \113\ Section 19(b)(1), 15 U.S.C. 78s(b)(1). Pursuant to Section 
19(b)(7)(C) of the Exchange Act, 15 U.S.C. 78s(b)(7)(C), an SRO 
cannot enforce a rule that has been abrogated by the Commission, 
unless the SRO refiles the proposed rule change under Section 
19(b)(1) of the Exchange Act, 15 U.S.C. 78s(b)(1), and it is 
approved by the Commission.
---------------------------------------------------------------------------

C. Solicitation of Comments

    As discussed above, the Commission recently published a proposal to 
replace Rule 19b-4 and Form 19b-4 with proposed Rule 19b-6 and proposed 
Form 19b-6.\114\ The Commission seeks comment on whether the Commission 
should adopt changes to Rule 19b-7 and Form 19b-7 if the Commission 
were to adopt proposed Rule 19b-6 and proposed Form 19b-6. 
Specifically, if the Commission were to adopt proposed Rule 19b-6 and 
proposed Form 19b-6, should Rule 19b-7 and Form 19b-7 be amended to 
mirror some or all of the requirements of Rule 19b-6 and Form 19b-6? 
What differences, if any, should remain between Form 19b-7 and Form 
19b-6? In the alternative, should all rule filings required to be made 
pursuant to Rule 19b-7 on Form 19b-7 be made, instead, on Form 19b-6? 
If so, the Commission seeks comment as to the modifications, if any, to 
Rule 19b-6 or Form 19b-6 that would be required.
---------------------------------------------------------------------------

    \114\ See Rule 19b-6 Proposing Release, supra note 99.
---------------------------------------------------------------------------

IV. Administrative Procedure Act

    Section 553(d) of the Administrative Procedure Act \115\ generally 
provides that, unless an exception applies, a substantive rule may not 
be made effective less than 30 days after notice of the rule has been 
published in the Federal Register. One exception to the 30-day 
requirement is an agency's finding of good cause for providing a 
shorter effective date.
---------------------------------------------------------------------------

    \115\ 5 U.S.C. 553(d).
---------------------------------------------------------------------------

    The CFMA provides that principal-to-principal transactions between 
certain market participants in security futures products may commence 
on August 21, 2001. For futures markets to be able to trade such 
products, they must first register as exchanges with the Commission and 
file with the Commission listing standards for security futures 
products. In addition, for trading to commence on August 21, 2001, a 
Limited Purpose National Securities Association must have filed with 
the Commission proposed rule changes to satisfy the requirements set 
forth in section 15A(k)(2) of the Exchange Act.\116\ Prior to the 
passage of the CFMA, there was no need for the Commission to have rules 
providing for the expedited registration of futures markets and process 
for filing of rule changes by futures markets and Limited Purpose 
National Securities Associations that the Commission is adopting today.
---------------------------------------------------------------------------

    \116\ 15 U.S.C. 78o-3(k)(2).
---------------------------------------------------------------------------

    Since the passage of the CFMA, the Commission has moved quickly to 
propose and adopt rules that would allow futures markets to register as 
national securities exchanges with the

[[Page 43731]]

Commission and allow futures markets and Limited Purpose National 
Securities Associations to file proposed rule changes with the 
Commission. The CFMA became law on December 21, 2000. The Commission 
proposed these rules, forms, and amendments to existing rules and form 
on May 15, 2001. The comment period for the rules, forms, and 
amendments to the existing rules and form expired on June 14, 2001. The 
Commission, after reviewing and considering the comments received, is 
now adopting the rules, forms, and amendments to the existing rules and 
form that would allow futures markets to register as national 
securities exchanges with the Commission and allow such exchanges and 
Limited Purpose National Securities Associations to file proposed rule 
changes with the Commission as required by the Exchange Act, as amended 
by the CFMA. By allowing certain principal-to-principal transactions to 
commence on August 21, 2001, Congress, in essence, established a 
statutory deadline for the adoption of the additional registration and 
listing rules. If the effective date is delayed for 30 days, the 
Commission will not have a rule filing process in place and, 
consequently, the National Futures Association, currently the only 
Limited Purpose National Securities Association, will be unable to file 
its proposed rule changes with the Commission before August 21, 2001.
    The primary purpose of the 30-day delayed effectiveness requirement 
is to give affected parties a reasonable period of time to adjust to 
the new rules. Here, parties that must comply with the rules, forms, 
and amendments to the existing rules and form--the futures exchanges 
and the National Futures Association--would not be harmed by immediate 
effectiveness of the rules, forms, and amendments to the existing rules 
and form. The futures exchanges are familiar with the proposed rules, 
forms, and amendments to the existing rules and form, and the rules, 
forms, and amendments to the existing rules and form as adopted are 
similar to the proposals, which were published for comment. Moreover, 
the 30-day delay in effectiveness could interfere with the goals of the 
CFMA. For these reasons, the Commission finds that good cause exists 
for the rules, forms, and amendments to the existing rules and form to 
be immediately effective upon publication.

V. Paperwork Reduction Act

    Certain provisions of the new rules and forms contain ``collection 
of information requirements'' within the meaning of the Paperwork 
Reduction Act of 1995 (``PRA'').\117\ Accordingly, the Commission 
submitted them to the Office of Management and Budget (``OMB'') in 
accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The Commission 
proposed to create a new collection of information titled ``Rule 6a-4 
and Form 1-N.'' OMB approved the new collection and assigned it OMB 
Control No. 3235-0554. The Commission proposed a second new collection 
of information titled ``Rule 19b-7 and Form 19b-7.'' OMB approved this 
new collection and assigned it OMB Control No. 3235-0553. Finally, the 
Commission proposed to revise a collection of information titled ``Rule 
19b-4 and Form 19b-4,'' which already had been assigned OMB Control No. 
3235-0045. OMB approved this revision. An agency may not conduct or 
sponsor, and a person is not required to respond to, a collection of 
information unless it displays a currently valid control number.
---------------------------------------------------------------------------

    \117\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    In the Proposing Release, the Commission solicited comments on 
these collection of information requirements.\118\ The Commission 
received no comments that specifically addressed the PRA portion of the 
Proposing Release. The Commission continues to believe that its 
estimates of the information collection burdens associated with the new 
rules and rule amendments are appropriate. These estimates are provided 
below, as are any changes to estimates resulting from modifications to 
the proposed rules.
---------------------------------------------------------------------------

    \118\ See Proposing Release, supra note 13.
---------------------------------------------------------------------------

A. Rule 6a-4 and Form 1-N

1. Summary of Collection of Information
    As discussed above, Rule 6a-4 sets forth procedures pursuant to 
which futures markets that meet certain criteria and wish to trade 
security futures products may ``notice register'' with the Commission. 
Under Rule 6a-4, a futures market that wishes to trade security futures 
products must file a Form 1-N with the Commission to become a national 
securities exchange. Form 1-N requires information regarding, among 
other things, how the exchange operates, its criteria for membership, 
its subsidiaries and affiliates, its rules and procedures, and the 
security futures products it intends to trade.
2. Proposed Use of Information
    The information obtained pursuant to Rule 6a-4 and Form 1-N would 
provide the Commission with basic information about a futures market 
that wishes to trade security futures products. This information will 
assist the Commission in fulfilling its regulatory obligations.
3. Respondents
    The Commission estimates that seven respondents will seek to become 
Security Futures Product Exchanges by filing notices on Form 1-N.
4. Total Annual Reporting and Recordkeeping Burden
    a. One-time Costs. Rule 6a-4 requires each entity wishing to become 
a Security Futures Product Exchange to file a Form 1-N. The Commission 
estimates that a Form 1-N submission will take approximately 31 hours 
to complete at a cost of approximately $3,000 (representing 
approximately 20 hours of legal work at $128/hour,\119\ 11 hours of 
clerical work at $31/hour,\120\ and $100 for miscellaneous clerical 
expenses). As the Commission believes that seven entities will file to 
become Security Futures Product Exchanges, the Commission estimates 
that the total burden on all respondents for filing Form 1-Ns will be 
approximately 217 hours (7 respondents x 31 hours/respondent), for a 
total cost of approximately $21,000 (7 responses x $3,000/response). 
The Commission received no comments on these estimates.
---------------------------------------------------------------------------

    \119\ SIA Management and Professional Earnings, Table 107 
(Attorney, New York), plus a 35% differential for bonus, overhead, 
and other expenses. The same estimate for the cost of legal work has 
been used throughout this section.
    \120\ SIA Management and Professional Earnings, Table 012 
(Secretary) plus a 35% differential for bonus, overhead, and other 
expenses. The same estimate for the cost of clerical work has been 
used throughout this section.
---------------------------------------------------------------------------

    b. Annual Costs. After an entity becomes a Security Futures Product 
Exchange by properly filing the initial Form 1-N, it will be subject to 
ongoing responsibilities to file: (1) Amendments to the Form 1-N in the 
event of material changes to the information provided in the Form 1-N; 
(2) periodic updates of certain information provided in the Form 1-N; 
(3) certain supplemental information, such as information that is 
provided to the exchange's members; and (4) a monthly report 
summarizing the exchange's trading of security futures products.
    In response to the comments received, the Commission made minor 
modifications to Rule 6a-4 and Form
1-N relating to the ongoing reporting requirements of Security Futures 
Product Exchanges. Specifically, the Commission: (1) Changed the time 
period within which respondents must report amendments to Exhibit F to 
Form 1-N from 10 days to 30 days; (2) removed the requirement that

[[Page 43732]]

respondents provide amendments to Exhibits C, E, and H to Form 1-N 
within 10 days; (3) established Rule
6a-4(b)(2),\121\ which requires respondents to maintain the information 
relating to Exhibits C and E and to provide such information to the 
Commission only on request; and (4) modified Exhibit G slightly to 
clarify that the scope of information required is limited to that 
information which relates to the trading of security futures products.
---------------------------------------------------------------------------

    \121\ 17 CFR 240.6a-4(b)(2).
---------------------------------------------------------------------------

    The Commission believes that these modifications will reduce the 
burdens on respondents in a general sense, but not for purposes of 
collection of information calculations required by the PRA. For 
example, respondents will incur the same costs and devote the same 
amount of time preparing amendments Exhibit F, but they will have 30 
days rather than 10 days, as originally proposed, to submit such 
amendments. Similarly, respondents will have to devote the same amount 
of resources to maintaining the information relating to Exhibits C and 
E, but Rule 6a-4(b)(2) relieves them of performing the ministerial task 
of delivering this information to the Commission whenever it is 
updated. Finally, the Commission notes that alternate means of updating 
information provided in the Form 1-N are available and encourages 
respondents to use these means to reduce their reporting burdens. These 
alternate means were present in the Commission's proposal and, as such, 
were accounted for when the Commission prepared its initial estimates 
of the burden on respondents under the PRA.
    Therefore, the Commission continues to estimate that each Security 
Futures Product Exchange will have to file one amendment or periodic 
update per year, resulting in a burden of approximately 15 hours and a 
total cost of approximately $1,438 (representing approximately 9 hours 
of legal work at $128/hour, 6 hours of clerical work at $31/hour, and 
$100 of miscellaneous clerical expenses). The Commission estimates that 
the total annual burden for all respondents to provide the required 
amendments and updates will be approximately 105 hours (15 hours/
respondent per year  x  7 respondents), for a total cost of 
approximately $10,066 ($1,438/response  x  7 responses/year).
    The Commission estimates that each year each Security Futures 
Product Exchange will file supplemental information 13 times and make 
12 monthly reports. The Commission believes that, to meet these 
requirements, each respondent will be required only to copy and send 
documents likely to be prepared for its own internal uses. Accordingly, 
the Commission estimates that each of these 25 filings will impose a 
burden of approximately .5 hours and approximately $21 (0.5 hours of 
clerical work at $31/hour and $5 for miscellaneous clerical expenses). 
The Commission estimates that the total annual burden for the 
collection of the supplemental information and monthly reports will be 
approximately 87.5 hours (25 filings/respondent  x  7 respondents  x  
0.5 hours/response), for a total cost of approximately $3,675 (25 
filings/respondent per year  x  7 respondents  x  $21/response).
    Therefore, the Commission concludes that the total annual paperwork 
burden for all Security Futures Product Exchanges (not including the 
one-time cost of filing the Form 1-N) will be approximately 192.5 hours 
(105 + 87.5), for a total cost of approximately $13,741 ($10,066 + 
$3,675).
    The Commission received no comments on these estimates.
5. Record Retention Period
    As set forth in Rule 17a-1 under the Exchange Act,\122\ a national 
securities exchange is required to retain records of the collection of 
information for at least five years, the first two years in an easily 
accessible place. However, for purposes of the Commission's 
recordkeeping requirements, Security Futures Product Exchanges must 
retain only those records relating to persons, accounts, agreements, 
contracts, and transactions involving security futures products.\123\
---------------------------------------------------------------------------

    \122\ 17 CFR 240.17a-1.
    \123\ See 15 U.S.C. 78q(b)(4)(B).
---------------------------------------------------------------------------

6. Collection of Information Is Mandatory
    This collection of information is mandatory for any futures market 
that is required by the Exchange Act to notice register with the 
Commission because it wishes to list or trade security futures 
products.
7. Confidentiality
    Any information collected pursuant to Rule 6a-4 and Form 1-N will 
be made publicly available.

B. Proposed Rule 19b-7 and Proposed Form 19b-7

1. Summary of Collection of Information
    Rule 19b-7 requires a Security Futures Product Exchange or Limited 
Purpose National Securities Association that proposes to add, delete, 
or amend its rules relating to certain subjects \124\ to submit such 
proposed rule change to the Commission on Form 19b-7. Form 19b-7 
requires the respondent: (1) To state the purpose of the proposed rule 
change; (2) to state the authority and statutory basis for the proposed 
rule change; (3) to describe the proposal's impact on competition; and 
(4) to provide a summary of any written comments on the proposed rule 
change received by the Security Futures Product Exchange or Limited 
Purpose National Securities Association.
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    \124\ See 15 U.S.C. 78f(g)(4)(B)(i) and 78o-3(k)(3)(A).
---------------------------------------------------------------------------

2. Proposed Use of Information
    The Commission will use the information obtained on Form 19b-7 to 
review proposed rule changes of Security Futures Product Exchanges and 
Limited Purpose National Securities Associations and to provide notice 
of these proposals to the public. The Commission will rely on the 
information provided in Form 19b-7, as well as public comment regarding 
such proposals, in determining whether it would be appropriate to 
abrogate a proposed rule change.
3. Respondents
    As noted above, the Commission expects that seven futures markets 
will become Security Futures Product Exchanges by filing Form 1-N. Upon 
doing so, these entities will become subject to the requirement to file 
Form 19b-7 with respect to most proposed rule changes relating to 
security futures products.\125\ In addition, the Commission anticipates 
that one Limited Purpose National Securities Association will be 
required to file certain rule changes relating to security futures 
products on Form 19b-7. Therefore, the Commission estimates that there 
will be eight respondents.
---------------------------------------------------------------------------

    \125\ Security Futures Product Exchanges and Limited Purpose 
National Security Associations are required to file certain proposed 
rule changes pursuant to Rule 19b-4 rather than Rule 19b-7. See 
infra notes 97, 111-113 and accompanying text.
---------------------------------------------------------------------------

4. Total Annual Reporting and Recordkeeping Burden
    The Commission estimates that each respondent will submit, on 
average, 15 proposed rule changes per year on Form 19b-7. Although the 
Commission receives approximately 20 to 100 proposed rule changes on 
Form 19b-4 per year from each of the existing SROs, the Commission 
notes that these Form 19b-4 filings cover a wide range of subject 
areas, including trading, membership, dispute resolution, exchange 
governance, and fees. By

[[Page 43733]]

contrast, Security Futures Product Exchanges and Limited Purpose 
National Securities Associations are required to file on Form 19b-7 
proposed rule changes relating only to security futures products. Given 
the limited types of rule changes that the proposed Form 19b-7 filings 
will cover, the Commission continues to believe that 15 filings per 
respondent per year is a reasonable estimate.
    As noted above, based on the comments received, the Commission has 
modified proposed Rule 19b-7 and proposed Form 19b-7 to more closely 
resemble Rule 19b-4 \126\ and Form 19b-4.\127\ The Commission has 
decided, among other things, not to adopt the following proposed 
requirements: (1) That Security Futures Product Exchanges and Limited 
Purpose National Securities Associations describe how the proposed rule 
change relates to any applicable provisions of the federal securities 
laws and the rules and regulations thereunder; (2) that a Security 
Futures Product Exchange or a Limited Purpose National Securities 
Association identify its rules and the provisions of the federal 
securities laws that the SRO reasonably expects the proposed rule 
change to affect, or to describe the anticipated effect of the proposed 
rule change on each applicable provision of the federal securities laws 
and applicable rules of the SRO; and (3) that a senior member of the 
management of the Security Futures Product Exchange or Limited Purpose 
National Securities Association certify that the proposed rule change 
satisfies a number of requirements.
---------------------------------------------------------------------------

    \126\ 17 CFR 240.19b-4.
    \127\ See supra notes 98-110, and accompanying text.
---------------------------------------------------------------------------

    The Commission believes that the net effect of the changes to Rule 
19b-7 will result in a slight decrease from the burden originally 
estimated. The Commission is reducing its estimate of the time required 
to complete a Form 19b-7 from 16.5 hours to 15.5 hours, with the cost 
required to complete a Form 19b-7 decreasing from approximately $1,824 
to approximately $1,696 (representing 11.5 hours of legal work at $128/
hour, 4 hours of clerical work at $31/hour, and $100 for miscellaneous 
clerical expenses). The Commission estimates that the total annual 
burden for all respondents to file proposed Form 19b-7 would now be 
approximately 1,860 hours (representing 15 filings/year per respondent 
x  8 respondents  x  15.5 hours/filing), for a total cost of 
approximately $203,520 ($1,696/filing  x  15 filings/year per 
respondent  x  8 respondents).
    The Commission received no comments on the accuracy of its initial 
estimates.\128\
---------------------------------------------------------------------------

    \128\ However, one commenter noted that, while the Commission 
originally estimated that an average Form 19b-7 filing would require 
approximately 12.5 hours of legal work and four hours of clerical 
work to complete, it estimated that a typical rule filing submitted 
to the CFTC would require less than a third of that time. See NFA 
Letter.
---------------------------------------------------------------------------

5. Record Retention Period
    As set forth in Rule 17a-1 under the Exchange Act,\129\ a national 
securities exchange or national securities association is required to 
retain records of the collection of information for at least five 
years, the first two years in an easily accessible place. However, for 
purposes of the Commission's recordkeeping requirements, Security 
Futures Product Exchanges and Limited Purpose National Securities 
Associations must retain only those records relating to persons, 
accounts, agreements, contracts, and transactions involving security 
futures products.\130\
---------------------------------------------------------------------------

    \129\ 17 CFR 240.17a-1.
    \130\ See 15 U.S.C. 78q(b)(4)(B).
---------------------------------------------------------------------------

6. Collection of Information Is Mandatory
    The collection of information requirements imposed by Rule 19b-7 
and Form 19b-7 are mandatory for Security Futures Products Exchanges 
and Limited Purpose National Securities Associations.
7. Confidentiality
    Any information collected pursuant to Rule 19b-7 and Form 19b-7 
will be made publicly available.

C. Proposed Amendments to Rule 19b-4 and Form 19b-4

1. Summary of Collection of Information
    Section 19 of the Exchange Act \131\ establishes procedures whereby 
national securities exchanges and national securities associations 
(collectively, ``SROs'') must file with the Commission proposals to 
add, delete, or amend their rules. Rule 19b-4 \132\ implements this 
procedure and requires SROs to file proposed rule changes on Form 19b-
4. Certain proposals submitted on Form 19b-4 require the approval of 
the Commission before they may take effect.
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    \131\ 15 U.S.C. 78s.
    \132\ 17 CFR 240.19b-4.
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    Although Security Futures Product Exchanges and Limited Purpose 
National Securities Associations generally will file proposed rule 
changes on Form 19b-7, there are two circumstances in which such 
entities will be required to file Form 19b-4: (1) a proposed rule 
change that relates to margin, except for a change that results in 
higher margin levels; and (2) a proposed rule change originally filed 
on Form 19b-7 that has been abrogated by the Commission because it 
appears that the proposal unduly burdens competition or efficiency, 
conflicts with the securities laws, or is inconsistent with the public 
interest and the protection of investors. A proposed rule change that 
is filed on Form 19b-7 but subsequently abrogated by the Commission 
must be refiled on Form 19b-4.\133\
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    \133\ Pursuant to Section 19(b)(7)(C) of the Exchange Act, 15 
U.S.C. 78s(b)(7)(C), an SRO cannot enforce a rule that has been 
abrogated by the Commission, unless the SRO refiles the proposed 
rule change under Section 19(b)(1) of the Exchange Act, 15 U.S.C. 
78s(b)(1), and it is approved by the Commission.
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2. Proposed Use of Information
    The Commission uses the information obtained under Rule 19b-4 to 
review proposed rule changes by SROs and to provide notice of these 
proposals to the public. The Commission relies on the information 
provided in Form 19b-4, as well as public comment regarding such 
proposals, in taking any action with respect to proposed rule changes. 
This information will assist the Commission in fulfilling its 
regulatory obligations.
3. Respondents
    Security Futures Product Exchanges and Limited Purpose National 
Securities Associations are required to comply with Rule 19b-4 and file 
proposed rule changes on Form 19b-4 in the two circumstances described 
above. The Commission believes that there will be seven Security 
Futures Product Exchanges and one Limited Purpose National Securities 
Association (the National Futures Association). In addition, all other 
SROs are currently required to comply with Rule 19b-4 and file proposed 
rule changes on Form 19b-4.
4. Total Annual Reporting and Recordkeeping Burden
    The Commission estimates that the amendments to Rule 19b-4 adopted 
today will result in an additional eight filings per year on Form 19b-
4. The Commission estimates that respondents devote, on average, 
approximately 35 hours to the filing of each Form 19b-4, at a cost of 
approximately $3,660 per filing (representing 25 hours of legal work at 
$128/hour, 10 hours of clerical work at $31/hour and $150 for 
miscellaneous clerical expenses). Therefore, the Commission estimates 
that the total annual burden for all respondents resulting from the 
amendments to Rule 19b-4 and Form 19b-4 will be approximately 280 hours 
(8 filings  x  35 hours/filing), for a total cost of approximately 
$29,280 (8 filings

[[Page 43734]]

 x  $3,660/filing).\134\ The Commission received no comments on these 
estimates.
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    \134\ These estimates do not include burdens associated with 
filings that propose wholesale additions or amendments to an SRO's 
rules. Such filings could result, for example, from the development 
of a new trading system. Past experience has demonstrated that about 
1% of Form 19b-4 filings are of this sort. Because these filings 
typically represent so few of the total number of Form 19b-4 filings 
and the scope of these filings may vary greatly from one filing to 
the next, the Commission has omitted them from the computation of 
the average cost associated with the respondents' reporting burden. 
Moreover, because proposed rule changes filed with the Commission by 
Security Futures Products Exchanges and Limited Purpose National 
Securities Associations will relate only to security futures 
products, the Commission does not anticipate that any of these 
filings will be among the 1%.
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5. Record Retention Period
    As set forth in Rule 17a-1 under the Exchange Act,\135\ SROs are 
required to retain records of the collection of information for at 
least five years, the first two years in an easily accessible place. 
However, for purposes of the Commission's recordkeeping requirements, 
Security Futures Product Exchanges and Limited Purpose National 
Securities Associations are required to retain only those records 
relating to persons, accounts, agreements, contracts, and transactions 
involving security futures products.\136\
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    \135\ 17 CFR 240.17a-1.
    \136\ See 15 U.S.C. 78q(b)(4)(B).
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6. Collection of Information Is Mandatory
    The collection of information requirements imposed by Rule 19b-4 
and Form 19b-4 are mandatory for all SROs, including Security Futures 
Products Exchanges and Limited Purpose National Securities 
Associations.
7. Confidentiality
    Any information collected pursuant to Rule 19b-4 and Form 19b-4 is 
made publicly available.

VI. Costs and Benefits of Final Rules

    In response to the mandate of the CFMA,\137\ which requires the 
Commission to prescribe, by rule, the process for notice registration 
to be used by designated contract markets and derivative transaction 
execution facilities to register as national securities exchanges 
pursuant to Section 6(g)(1) of the Exchange Act \138\ (``Security 
Futures Product Exchanges''), the Commission is adopting Rule 6a-4 
under the Exchange Act \139\ and Form
1-N. Rule 6a-4 and Form 1-N prescribe the requirements for Security 
Futures Product Exchanges to list and trade futures on individual 
stocks and narrow-based stock indexes, including puts, calls, 
straddles, options, or privileges thereon. The Commission also is 
adopting conforming amendments to Rules 6a-2 and 6a-3 under the 
Exchange Act \140\ and Rule 202.3 of the Commission's procedural 
rules.\141\ Furthermore, the Commission is adopting Rule
19b-7,\142\ Form 19b-7, and conforming amendments to Rule 19b-4 \143\ 
and Form 19b-4 to accommodate certain proposed rule changes that will 
be submitted by Security Futures Product Exchanges and Limited Purpose 
National Securities Associations registered pursuant to Section 15A(k) 
of the Exchange Act.\144\ Under Rule 6a-4, Security Futures Product 
Exchanges will submit information and documents that are comparable to 
the requirements applicable to national securities exchanges registered 
pursuant to Section 6(a) of the Exchange Act.\145\ In addition, Rule 
19b-7 \146\ and Form 19b-7 establish the procedures to be used by 
Security Futures Product Exchanges and Limited Purpose National 
Securities Associations when filing proposed rule changes that relate 
to certain matters, including higher margin levels, fraud or 
manipulation, recordkeeping, reporting, listing standards, or decimal 
pricing for security futures products, sales practices for security 
futures products for persons who effect transactions in security 
futures products, or rules effectuating such Security Futures Product 
Exchanges' and Limited Purpose National Securities' obligations to 
enforce the securities laws. The conforming amendments to Rule
19b-4 \147\ and Form 19b-4 apply to proposed rule changes relating to 
margin, except for changes that result in higher margin levels, and 
proposed rule changes that have been abrogated pursuant to Section 
19(b)(7)(C) of the Exchange Act \148\ and refiled under Section 
19(b)(1) of the Exchange Act.\149\
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    \137\ Pub. L. No. 106-554, Appendix E, 114 Stat. 2763
    \138\ 15 U.S.C. 78f(g)(1).
    \139\ 17 CFR 240.6a-4.
    \140\ 17 CFR 240.6a-2 and 240.6a-3.
    \141\ 17 CFR 202.3.
    \142\ 17 CFR 240.19b-7.
    \143\ 17 CFR 240.19b-4.
    \144\ 15 U.S.C. 78o-3(k).
    \145\ 15 U.S.C. 78f(a).
    \146\ 17 CFR 240.19b-7.
    \147\ 17 CFR 240.19b-4.
    \148\ 15 U.S.C. 78s(b)(7)(C).
    \149\ 15 U.S.C. 78s(b)(1). Pursuant to Section 19(b)(7)(C) of 
the Exchange Act, 15 U.S.C. 78s(b)(7)(C), an SRO cannot enforce a 
rule that has been abrogated by the Commission, unless the SRO 
refiles the proposed rule change under Section 19(b)(1) of the 
Exchange Act, 15 U.S.C. 78s(b)(1), and it is approved by the 
Commission.
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    A. Comments
    In the Proposing Release,\150\ the Commission requested comment on 
all aspects of the costs and benefits of the adopted rules, forms, and 
conforming amendments to existing rules and forms, including 
identification of additional costs and benefits of the changes. In 
addition, the Commission encouraged commenters to identify, discuss, 
analyze, and supply relevant data regarding any additional costs or 
benefits.
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    \150\ See Proposing Release, supra note 13.
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    Although there were no comments that specifically addressed the 
Costs and Benefits Analysis in the Proposing Release, there were 
comments that may apply generally to the costs and benefits of the 
adopted rules, forms, and amendments to existing rules and forms. 
Accordingly, the Commission anticipates that the rules, forms and 
conforming amendments to existing rules and forms adopted today will 
generate the costs and benefits described below and has incorporated 
the general comments into the applicable discussion.
    B. Costs and Benefits of Rule 6a-4, Form 1-N, and Conforming 
Amendments to Rules 6a-2 and 6a-3 under the Exchange Act and Rule 202.3 
of the Commission's Procedural Rules As discussed above, the Commission 
is adopting Rule 6a-4 and Form 1-N, with slight modifications, in 
response to concerns raised by commenters. The Commission also is 
adopting amendments to Exchange Act Rules 6a-2 and 6a-3 \151\ and Rule 
202.3 of the Commission's procedural rules,\152\ substantially as 
proposed.
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    \151\ 17 CFR 240.6a-2 and 240.6a-3.
    \152\ 17 CFR 202.3.
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    Rule 6a-4 requires an exchange registering pursuant to Section 6(g) 
of the Exchange Act \153\ to file Form
1-N \154\ with the Commission.\155\ Once registered, a Security Futures 
Product Exchange must file with the Commission written notice of 
actions that create new information or render inaccurate information 
filed on the Form 1-N.\156\ A Security Futures Product Exchange also 
must file with the Commission an amendment to Form 1-N setting forth 
the nature and effective date of the action taken that creates new 
information or renders inaccurate information filed on the execution 
page within 10 days after such action is taken,\157\ or as part of 
Exhibit F of its Form 1-N within 30

[[Page 43735]]

days after such action is taken.\158\ Rule 6a-4(b)(2) also requires a 
Security Futures Product Exchange to maintain records relating to 
changes in information required in Exhibits C and E that are up-to-date 
within 30 days and available to the Commission upon request.\159\ A 
Security Futures Product Exchange also has to file as an amendment, on 
or before June 30, 2002 and by June 30 every year thereafter, Exhibits 
F, H, and I, which are required to be up-to-date as of the latest date 
practicable within three months of the date the amendment was 
filed.\160\ In addition, a Security Futures Product Exchange must file, 
as an amendment to its Form 1-N, on or before June 30, 2004 and by June 
30 every three years thereafter, complete Exhibits A, B, C, and E, 
which are required to be up-to-date as of the latest date practicable 
within three months of the date the amendment was filed.\161\ However, 
Rule 6a-4(b)(5) allows a Security Futures Product Exchange to meet the 
obligations of Rule 6a-4(b)(3) and (b)(4) through certain alternate 
means. First, pursuant to proposed Rule 6a-4(b)(5)(i), a Security 
Futures Product Exchange could provide responsive information that was 
available in a publication that is issued on an annual or more frequent 
basis.\162\ Second, pursuant to proposed Rule 6a-4(b)(5)(ii), a 
Security Futures Product Exchange could make the responsive information 
available to the Commission and to the public upon request by 
certifying that this information is kept up-to-date and is available to 
the Commission and to the public upon request.\163\ Third, pursuant to 
proposed Rule 6a-4(b)(5)(iii), a Security Futures Product Exchange 
could make the responsive information continuously available on a web 
site that the exchange controls.\164\
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    \153\ 15 U.S.C. 78f(g).
    \154\ 17 CFR 249.10.
    \155\ 17 CFR 240.6a-4(a)(1).
    \156\ 17 CFR 240.6a-4(a)(2).
    \157\ 17 CFR 240.6a-4(b)(1)(i).
    \158\ 17 CFR 240.6a-4(b)(1)(ii).
    \159\ 17 CFR 240.6a-4(b)(2). A Security Futures Product Exchange 
need not file with the Commission updates of this information on an 
event-specific basis.
    \160\ 17 CFR 240.6a-4(b)(3).
    \161\ 17 CFR 240.6a-4(b)(4).
    \162\ 17 CFR 240.6a-4(b)(5)(i).
    \163\ 17 CFR 240.6a-4(b)(5)(ii).
    \164\ 17 CFR 240.6a-4(b)(5)(iii).
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    The Commission is adopting Rule 6a-4(c)(1)\165\ and 6a-4(c)(2)\166\ 
as proposed. Rule 6a-4(c)(1) requires a Security Futures Product 
Exchange to file with the Commission any material related to the 
trading of security futures products (including notices, circulars, 
bulletins, lists, and periodicals) that is issued or made generally 
available to members of, participants in, or subscribers to, the 
exchange within 10 days after issuing it or making it generally 
available. A Security Futures Product Exchange, in lieu of making a 
hardcopy submission, could comply with this requirement by indicating 
the location of a web site where such information may be continuously 
found and certifying that the information available at that location is 
accurate as of the date that the exchange submits such 
certification.\167\ Furthermore, Rule 6a-4(c)(2) requires every 
Security Futures Product Exchange to file a report within 15 days after 
the end of each calendar month that includes: (1) For each contract of 
sale for future delivery of a single security, the number of contracts 
traded on the exchange during the relevant calendar month and the total 
number of shares underlying such contracts traded; and (2) for each 
contract of sale for future delivery of a narrow-based security index, 
the number of contracts traded on the exchange during the relevant 
calendar month and the total number of shares represented by the index 
underlying such contracts traded.\168\
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    \165\ 17 CFR 240.6a-4(c)(1).
    \166\ 17 CFR 240.6a-4(c)(2).
    \167\ 17 CFR 240.6a-4(c)(1)(ii).
    \168\ 17 CFR 240.6a-4(c)(2).
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    The conforming amendments to Rules 6a-2 and 6a-3 exclude 
respondents from the requirements of these rules, and, therefore, the 
Commission believes that there would be no costs imposed on, nor 
benefits accruing to, the respondents arising from the conforming 
amendments. Finally, Rule 202.3 of the Commission's procedural rules 
provides that notice forms for registration as a national securities 
exchange filed with the Commission are routed within the Commission to 
the Division of Market Regulation, and, therefore, the Commission 
believes that there would be no costs imposed on, nor benefits accruing 
to, the respondents arising from the conforming amendment.
1. Benefits
    Rule 6a-4 provides for an expedited process for a market to become 
notice-registered with the Commission as a Security Futures Product 
Exchange. Notably, Form 1-N is not an application that requires an 
approval from the Commission. Because an exchange registering with the 
Commission pursuant to section 6(g) of the Exchange Act\169\ is also 
subject to the CFTC's application and reporting requirements, Form 1-N 
requests only limited, basic information the vast majority of which the 
respondents are likely to compile for their internal use. The 
Commission estimates that the amount of time required to complete Form 
1-N will be one-third less than the amount of time currently required 
to complete Form 1, the application used to register as a national 
securities exchange or to apply for an exemption from exchange 
registration based on limited volume pursuant to section 6(a) of the 
Exchange Act.\170\ Furthermore, pursuant to section 6(g)(2)(A) of the 
Exchange Act,\171\ in those instances in which the market has filed 
information with the CFTC and to the extent that such documents contain 
information satisfying the Commission's informational requirements, 
copies of such documents could be filed with the Commission in lieu of 
submitting those exhibits to the Form, therefore reducing a market's 
burden of compiling information.\172\ Pursuant to section 6(g)(2)(B) of 
the Exchange Act,\173\ such notice registration will be effective 
contemporaneously with the submission of Form 1-N, unless the 
registration is subject to suspension or revocation by the CFTC. The 
information provided by markets filing Form 1-Ns will be required to be 
up-to-date as of 1 month of the date of filing, which will provide the 
markets with additional flexibility in the preparation of the required 
documents.
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    \169\ 15 U.S.C. 78f(g).
    \170\ 15 U.S.C. 78f(a).
    \171\ 15 U.S.C. 78f(g)(2)(A).
    \172\ 17 CFR 240.6a-4(b)(7).
    \173\ 15 U.S.C. 78f(g)(2)(B).
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    As a mechanism to further reduce the filing burdens on Security 
Futures Product Exchanges, the Commission is allowing such exchanges to 
comply with the requirements for filing amendments and supplemental 
materials by maintaining the information on an Internet web page and 
providing the location of such web site to the Commission.\174\ Instead 
of filing amendments in paper form, a Security Futures Product Exchange 
also is permitted to refer to materials published by, or in cooperation 
with, the exchange that contain the required information or to make the 
information available upon request at its office.\175\ Permitting 
respondents to use the Internet as a means of compliance will reduce 
expenses associated with clerical time, postage, and copying and 
increase the speed, accuracy, and availability of information 
beneficial to investors and financial markets.
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    \174\ 17 CFR 240.6a-4(b)(5)(iii) and (c)(1)(ii).
    \175\ 17 CFR 240.6a-4(b)(5)(i) and (ii).
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    Furthermore, the Commission is exempting a Security Futures Product 
Exchange from filing the required amendments for any affiliate or 
subsidiary listed in Exhibit C of the

[[Page 43736]]

exchange's notice registration that either is listed in Exhibit C to 
the form for registration or notice registration of one or more other 
national securities exchanges, or was an inactive affiliate or 
subsidiary throughout the affiliate's or subsidiary's latest fiscal 
year.\176\ This will limit the information required to be provided to 
that information that is relevant to the Security Futures Product 
Exchange's trading of security futures products.
---------------------------------------------------------------------------

    \176\ 17 CFR 240.6a-4(b)(6).
---------------------------------------------------------------------------

    The new rules also provide a mechanism by which entities that wish 
to notice register with the Commission may do so. By providing a 
mechanism for notice registration, the new rules will provide 
additional markets with the opportunity to trade security futures 
products, thereby enhancing competition. The rules also provide legal 
certainty and implement the statutory mandate imposed by the CFMA.
    The new rules and forms will enhance the Commission's ability to 
oversee the exchanges trading security futures products, which is 
critical to the continued integrity of the markets, while enabling the 
Commission to fulfill its statutory obligations under the CFMA. The 
Commission believes that its oversight, in conjunction with that of the 
CFTC, over trading activities in security futures products will benefit 
the public and the markets generally by helping to prevent fraud and 
manipulation.
2. Costs
    Rule 6a-4 and Form 1-N will require the respondents to comply with 
the notice and amendment requirements, which will require some effort 
in gathering the information to file with the Commission. The 
respondents have gathered most of this information, and currently 
provide it to the CFTC. The exchanges may provide copies of existing 
documents provided to the CFTC to the Commission in lieu of completing 
Form 1-N, to the extent that such documents contain information 
satisfying the Commission's informational requirements.\177\ Therefore, 
the Commission believes that the costs incurred by the proposed rules 
and forms have been minimized. As discussed above, the Commission 
estimates that the average paperwork cost for each registration would 
be approximately $3,000 for each respondent.\178\
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    \177\ 17 CFR 240.6a-4(b)(7).
    \178\ See supra Section V.A.4.a.
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    One commenter, however, felt that Form 1-N is notice registration 
only in the sense that the Commission does not approve the 
application.\179\ Otherwise, this commenter felt that the proposed 
procedure requires the same effort and expense as a standard 
application for registration as a national securities exchange. The 
same commenter urged the Commission to not require a ``wasteful 
duplication of information that is on public file with the CFTC, [but 
instead] * * * to adopt the same standards and procedures proposed by 
the CFTC.'' The commenter, however, did not offer specific data or 
support calculating the amount of effort and expense believed to be 
incurred by completing Form 1-N. The Commission notes that Section 
6(g)(2)(A) of the Exchange Act expressly states that exchanges that 
wish to register with the Commission may file written notice ``in such 
form as the Commission, by rule, may prescribe containing the rules of 
the exchange and such other information and documents concerning such 
exchange, comparable to the information and documents required for 
national securities exchanges * * *.'' The Commission continues to 
believe that Form 1-N not only implements the statute, but also, 
provides an expedited process of notice registration because, to the 
extent that information has been compiled for a market's internal use 
or for submission to the CFTC, copies of such documents may be provided 
to the Commission in lieu of submitting newly-prepared exhibits to Form 
1-N.
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    \179\ See CME Letter.
---------------------------------------------------------------------------

    Another commenter stated that the requirements in completing Form 
1-N are unreasonably burdensome and there is a huge disparity when 
compared to the requirements that the CFTC imposes upon securities 
exchanges desiring to become designated contract markets in security 
futures products.\180\ As a result, the commenter felt that it would be 
much more difficult to notice register with the Commission than it 
would be with the CFTC, since the Commission requires much more 
information than is routinely filed by a designated contract market 
with the CFTC. Because the CFTC is the primary regulator of the 
Security Futures Product Exchanges, the commenter stated that it is not 
necessary or appropriate in the public interest or for the protection 
of investors for the Commission to impose substantially similar filing 
requirements on Security Futures Product Exchanges as those imposed on 
other securities exchanges. The commenter urged the Commission to 
modify its Rule 6a-4 and Form 1-N to be consistent with the more 
moderate approach taken by the CFTC. The Commission believes, however, 
that the differences in approach proposed by the two agencies reflect 
the different statutory frameworks under which each agency operates. In 
addition, the Commission notes that contrary to the commenter's views, 
although permissible under section 6(g)(2)(A) of the Exchange Act, the 
Commission is not imposing substantially similar filing requirements on 
Security Futures Product Exchanges as are imposed on other securities 
exchanges. Instead, the Commission has limited the information required 
to information directly related to the Security Futures Product 
Exchanges' trading of security futures products. Finally, the 
Commission believes that the required information is necessary for the 
Commission to fulfill its regulatory responsibilities.
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    \180\ See CBOT Letter.
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    As discussed above, the conforming amendments to Rules 6a-2 and 6a-
3 \181\ will exclude Security Futures Product Exchanges from the costs 
associated with these rules. However, Rule 6a-4 will require 
respondents to provide periodic amendments to their initial notice 
registration. As discussed above, the Commission estimates that the 
average paperwork cost for each amendment and periodic update would be 
approximately $1,438.\182\ Because the Commission expects that the 
exchanges will prepare the requested information for their internal 
use, the Commission anticipates that paperwork costs would be the only 
costs associated with this requirement.
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    \181\ 17 CFR 240.6a-2 and 240.6a-3.
    \182\ See supra Section V.A.4.b.
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    One commenter stated that the Commission should adopt the CFTC's 
less burdensome approach given the fact that the Security Futures 
Product Exchanges remain subject to the primary jurisdiction of the 
CFTC.\183\ In addition, the commenter suggested that the Commission, at 
the very least, require that amendments regarding new information or to 
correct information that has become inaccurate should be limited to 
material inaccuracies, and that the 10-day timeframe be changed to a 
minimum of 30 days. The commenter also noted that it would be 
particularly burdensome to require information pertaining to the 
addition of new, or the withdrawal of old, owners, members, 
participants, subscribers, or other users be provided within 10 days 
since these would be subject to frequent change. The commenter 
suggested that Exhibits F and H be submitted annually to meet the 
Commission's need for this information instead of requiring

[[Page 43737]]

piecemeal amendments every time an individual is added or removed from 
one of these categories.
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    \183\ See CBOT Letter.
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    The Commission notes that the addition of new, or the withdrawal of 
old, owners, members, participants, subscribers, or other users would 
not constitute a material change requiring an update within 10 days. In 
addition, much of the required information will not change frequently, 
and the option of posting information on an Internet web site will 
encourage more frequent updating of current information and reduce the 
cost of filing the amendments on paper. The Commission also is 
retaining the requirement that a Security Futures Product Exchange 
submit updates to the information provided in Exhibit F.
    However, in response to the commenter's concerns, the Commission 
has slightly modified the filing requirements for respondents under 
Rule 6a-4. Specifically, the Commission changed the time period within 
which respondents must report amendments to Exhibit F to Form 1-N from 
10 days to 30 days and removed the requirement that respondents provide 
amendments to Exhibits C, E, and H to Form 1-N within 10 days. The 
Commission believes that 30 days, rather than 10 days, would be an 
appropriate timeframe, particularly in light of the fact that these 
entities will be subject to the primary regulation of the CFTC. In 
addition, the Commission is adopting a new provision, Rule 6a-
4(b)(2),\184\ that requires Security Futures Product Exchanges to 
provide the information required in Exhibits C and E only upon request 
of the Commission. Under the rule, a Security Futures Product Exchange 
must maintain records relating to changes in information required in 
Exhibits C and E as of the latest practicable date, but, at a minimum, 
be up-to-date within 30 days, but need not file with the Commission 
updates of this information on an event-specific basis. Furthermore, 
periodic updates to Exhibits F, H, and I under Rule 6a-4(b)(3) and 
Exhibits A, B, C, and E under Rule 6a-4(b)(4) could be accomplished by 
using the alternate means discussed above, and, consequently, the 
modifications to the Commission's proposal should alleviate the burden 
on Security Futures Product Exchanges in preparing the amendments. 
These amendments also will help to ensure that the Commission receives 
accurate and updated information about Security Futures Product 
Exchanges so that it may carry out its regulatory responsibilities.
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    \184\ 17 CFR 240.6a-4(b)(2).
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    Finally, paragraph (c) of Rule 6a-4 requires Security Futures 
Product Exchanges to furnish to the Commission copies of all materials 
related to the trading of security futures products (including notices, 
circulars, bulletins, lists, and publications) issued or made available 
to members of, participants in or subscribers to, the exchange.\185\ 
Exchanges will be permitted to make the information available on an 
Internet web site and provide the Commission with the location of the 
web site.\186\ Paragraph (c) of Rule 6a-4 also requires Security 
Futures Product Exchanges to file transaction reports within 15 days 
after the end of each calendar month containing, for each security 
futures product traded on such exchange, the number of contracts 
traded, and the type of security underlying such contract.\187\ As 
discussed above, the Commission estimates that each respondent will 
incur an average paperwork cost of $21 for each filing.\188\ Because 
the Commission expects that the exchanges will prepare the requested 
information for their internal use, the Commission anticipates that 
paperwork costs would be the only costs associated with this 
requirement.
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    \185\ 17 CFR 240.6a-4(c)(1)(i).
    \186\ 17 CFR 240.6a-4(c)(1)(ii).
    \187\ 17 CFR 240.6a-4(c)(2).
    \188\ See supra Section V.A.4.b.
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    One commenter believed that the Commission's proposal to allow 
certain requirements to be met by maintaining the information on an 
Internet web page, by referring to materials published by the exchange, 
or by making the information available upon request at the exchange's 
office are ineffective attempts at limiting the filing burden since a 
significant portion of the required information is information 
generally not made available to the public.\189\ The same commenter 
also felt that the requirement to file copies of any materials related 
to the trading of security futures products that would be provided to 
their members, participants, or subscribers within 10 days of their 
provision should either not be adopted or be increased to within a 
timeframe of at least 30 days.
---------------------------------------------------------------------------

    \189\ See CBOT Letter.
---------------------------------------------------------------------------

    The Commission does not believe that the 10-day requirement in 
which to provide the supplemental materials is unduly burdensome and 
believes that providing alternate means, such as web sites or 
publications, for Security Futures Product Exchanges to provide updates 
of certain required information can relieve some of the burden imposed 
on the exchanges. In addition, the Commission believes that there 
should not be a discrepancy between the time periods in which Security 
Futures Product Exchanges and other national securities exchanges must 
revise inaccurate or incomplete information provided in their filings.

C. Costs and Benefits of Rule 19b-7 and Form 19b-7 and Conforming 
Amendments to Rule 19b-4 and Form 19b-4

    Rule 19b-7 requires the Commission to promptly publish Security 
Futures Product Exchanges' and Limited Purpose National Securities 
Associations' proposed rule changes that were filed pursuant to section 
19(b)(7) of the Exchange Act \190\ on Form 19b-7.
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    \190\ 15 U.S.C. 78s(b)(7).
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    Pursuant to section 19(b)(1) of the Exchange Act,\191\ all self-
regulatory organizations (``SROs'') are required to file with the 
Commission copies of any proposed rule, or any addition to or deletion 
from the rules of such SRO (``proposed rule change''). The CFMA 
exempted Security Futures Product Exchanges and Limited Purpose 
National Securities Associations from submitting proposed rule changes 
pursuant to section 19(b) of the Exchange Act,\192\ except in three 
circumstances. First, pursuant to sections 6(g)(4)(B)(i) \193\ and 
15A(k)(3)(A) \194\ of the Exchange Act, proposed rule changes that 
relate to higher margin levels, fraud or manipulation, recordkeeping, 
reporting, listing standards, or decimal pricing for security futures 
products, sales practices for security futures products for persons who 
effect transactions in security futures products, or rules effectuating 
such SRO's obligation to enforce the securities laws must be submitted 
to the Commission pursuant to new Section 19(b)(7) of the Exchange 
Act.\195\ Second, pursuant to sections 6(g)(4)(B)(ii) \196\ and 
15A(k)(3)(B) \197\ of the Exchange Act, Security Futures Product 
Exchanges and Limited Purpose National Securities Associations are 
required to submit proposed rule changes that relate to margin, except 
for those that result in higher margin levels, under sections

[[Page 43738]]

19(b)(1) and (b)(2) of the Exchange Act.\198\ Finally, pursuant to 
sections 6(g)(4)(B)(iii) \199\ and 15A(k)(3)(C) \200\ of the Exchange 
Act, proposed rule changes that have been abrogated by the Commission 
pursuant to new section 19(b)(7)(C) of the Act \201\ must be refiled 
under section 19(b)(1) of the Act.\202\
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    \191\ 15 U.S.C. 78s(b)(1).
    \192\ 15 U.S.C. 78s(b).
    \193\ 15 U.S.C. 78f(g)(4)(B)(i).
    \194\ 15 U.S.C. 78o-3(k)(3)(A).
    \195\ Section 19(b)(7) of the Exchange Act grants to the 
Commission the authority to adopt rules regarding the filing of 
proposed rule changes by Security Futures Product Exchanges and 
Limited Purpose National Securities Associations. 15 U.S.C. 
78s(b)(7).
    \196\ 15 U.S.C. 78f(g)(4)(B)(ii).
    \197\ 15 U.S.C. 78o-3(k)(3)(B).
    \196\ 15 U.S.C. 78s(b)(1) and (b)(2).
    \199\ 15 U.S.C. 78f(g)(4)(B)(iii).
    \200\ 15 U.S.C. 78o-3(k)(3)(C).
    \201\ 15 U.S.C. 78s(b)(7)(C).
    \202\ 15 U.S.C. 78s(b)(1). Pursuant to Section 19(b)(7)(C) of 
the Exchange Act, 15 U.S.C. 78s(b)(7)(C), and SRO cannot enforce a 
rule that has been abrogated by the Commission, unless the SRO 
refiles the proposed rule change under section 19(b)(1) of the 
Exchange Act, 15 U.S.C. 78s(b)(1), and it is approved by the 
Commission.
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    After carefully considering the comment letters,\203\ the 
Commission has decided to adopt the amendments to Rule 19b-4 and Form 
19b-4 as proposed and to adopt Rule 19b-7 and Form 19b-7 with 
modifications in response to concerns raised by commenters to make the 
rule and the form more closely comparable to the current rule filing 
process.
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    \203\ See supra note 15.
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1. Benefits
    Pursuant to the statutory mandate, the Commission will not be 
approving proposed rule changes submitted pursuant to Rule 19b-7.\204\ 
Instead, a proposed rule change filed on Form 19b-7 will become 
effective upon: (i) An exchange's filing of a written certification 
with the CFTC under Section 5c(c) of the CEA; \205\ (ii) a 
determination by the CFTC that review of the proposed rule change is 
not necessary; or (iii) approval of the proposed rule change by the 
CFTC. The Commission is adding language to Form 19b-7 to reflect the 
three events \206\ upon which a proposed rule change submitted under to 
section 19(b)(7) of the Exchange Act \207\ may take effect pursuant to 
Section 19(b)(7)(B) of the Exchange Act.\208\ A Security Futures 
Product Exchange or Limited Purpose National Securities Association 
will be required to file with the Commission, along with Form 19b-7, a 
copy of any written certification filed with the CFTC pursuant to 
Section 5c(c) of the CEA.\209\ As discussed above, if a proposed rule 
change is effective because of a CFTC determination not to review such 
proposal or because the CFTC has approved the proposal, the Securities 
Futures Product Exchange or Limited Purpose National Securities 
Association will be required to so state in the Form 19b-7.
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    \204\ See Section 19(b)(7)(B) of the Exchange Act, 15 U.S.C. 
78s(b)(7)(B).
    \205\ 7 U.S.C. 7a-2(c)
    \206\ In the Proposing Release, the Commission proposed to 
address only written certifications filed with the CFTC under 
Section 5c(c) of the CEA. See Proposing Release, supra note.
    \207\ 15 U.S.C. 78s(b)(7).
    \208\ 15 U.S.C. 78s(b)(7)(B).
    \209\ Id.
---------------------------------------------------------------------------

    In addition, Rule 19b-7 states that a proposed rule change will not 
be deemed filed on the date it is received unless a completed Form 19b-
7 is submitted. To elicit meaningful comment, Rule 19b-7 requires 
proposed rule changes to include (i) A clear and concise statement of 
the basis and purpose of such rule change, including the impact on 
competition or efficiency, if any, and (ii) a summary of any written 
comments received by the SRO on the proposed rule change. The 
Commission notes that these requirements are substantially the same as 
are required to be submitted in Form 19b-4 for existing SROs \210\ and 
should provide clarity to the filing requirements for proposed rule 
changes submitted under section 19(b)(7) of the Exchange Act.\211\
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    \210\ See Form 19b-4, General Instructions, B. Need for Careful 
Preparation of the Completed Form, Including Exhibits; Information 
to Be Included in the Completed Form, Item 3, Self-Regulatory 
Organization's Statement of the Purpose of, and Statutory Basis for, 
the Proposed Rule Change; and Item 5, Self-Regulatory Organization's 
Statement on Comments on the Proposed Rule Change Received from 
Members, Participants, or Others.
    \211\ 15 U.S.C. 78s(b)(7).
---------------------------------------------------------------------------

    The Commission also has decided not to adopt proposed paragraph (c) 
to proposed Rule 19b-7, which stated that the effectiveness of a 
proposed rule change submitted pursuant to section 19(b)(7) of the 
Exchange Act \212\ would not create an inference of whether the 
proposed rule change was in the public interest, including whether it 
had an impact on competition. The Commission notes that this language 
was proposed in proposed Rule 19b-6 and, therefore, it is not currently 
applicable to existing SROs.
---------------------------------------------------------------------------

    \212\ Id.
---------------------------------------------------------------------------

    The Commission also added language to Rule 19b-7 to require SROs to 
retain at their principal place of business a file, available to 
interested persons for public inspection and copying, containing all 
filings made pursuant to Rule 19b-7 as well as all related 
correspondence and other communications reduced to writing. This 
language mirrors Rule 19b-4 \213\ and also is incorporated in Forms 
19b-4\214\ and 19b-7.\215\
---------------------------------------------------------------------------

    \213\ See Rule 19b-4(i), 17 CFR 240.19b-4(i).
    \214\ See Form 19b-4, Exhibit 1, Item II, Self-Regulatory 
Organization's Statement of the Purpose of, and Statutory Basis for, 
the Proposed Rule Change; and Item IV, Solicitation of Comments.
    \215\ See Form 19b-7 Notice, Item II, Self-Regulatory 
Organization's Statement of the Purpose of, yand Statutory Basis 
for, the Proposed Rule Change; and Item IV, Solicitation of 
Comments.
---------------------------------------------------------------------------

    Further, the Commission has decided not to adopt the requirement 
that a senior member of an exchange's or association's management 
certify that the proposed rule change satisfied a number of 
requirements. In response to one commenter \216\ the Commission agrees 
that the proposed certification requirement should not be imposed on 
Security Futures Product Exchanges and Limited Purpose National 
Securities Associations at this time because existing SROs are not 
currently subject to such a requirement. Form 19b-7, however, will 
require the signature of a senior member of an exchange's or 
association's management, as currently is required by Form 19b-4.
---------------------------------------------------------------------------

    \216\ See CBOE Letter.
---------------------------------------------------------------------------

    The adopted Form 19b-7 also will not require Security Futures 
Product Exchanges and Limited Purpose National Securities Associations 
to describe how the proposed rule change relates to any applicable 
provisions of the federal securities laws and the rules and regulations 
thereunder, to identify its rules and the provisions of the federal 
securities laws that the SRO reasonably expects the proposed rule 
change to affect, or to describe the anticipated effect of the proposed 
rule change on each applicable provision of the federal securities laws 
and applicable rules of the SRO. In response to the concerns raised by 
a commenter,\217\ the Commission has decided not to adopt these 
proposed provisions because they are not required of existing SROs in 
the current Form 19b-4.
---------------------------------------------------------------------------

    \217\ Id.
---------------------------------------------------------------------------

    Proposed rule changes filed with the Commission will be required to 
be filed concurrently with the CFTC. However, pursuant to the CFMA, 
only the Commission is required to publish notice of the proposed rule 
change for comment. Consequently, although respondents must file 
certain proposed rule changes with two agencies, there will, in effect, 
be only one effort in the collection and compilation of information.
    The Commission believes that Rule 19b-7 and Form 19b-7 and 
amendments to existing Rule 19b-4 and Form 19b-4 are designed to 
provide information sufficient to permit interested persons to submit 
meaningful comment on the proposals. By providing an opportunity for 
the public and market participants, including investors, to comment on 
proposed rule changes, the rule and the form should enhance the 
Commission's ability to

[[Page 43739]]

better assess the anticipated impact of such rule proposals. In 
addition, Rule 19b-7 and Form 19b-7 are intended to inform the 
Commission's consideration of whether a proposed rule change should be 
abrogated because it unduly burdens competition or efficiency, 
conflicts with securities laws, or is inconsistent with the public 
interest or the protection of investors. Accordingly, Rule 19b-7 and 
Form 19b-7 and amendments to Rule 19b-4 and Form 19b-4 should enable 
the Commission to carry out its statutorily-mandated oversight 
functions, including helping to ensure that SROs carry out their 
regulatory functions as well as protect the integrity of the markets, 
investors, and the public interest.
2. Costs
    One commenter noted that the submission requirements proposed by 
the Commission are significantly more time consuming and detailed than 
those of the CFTC.\218\ The commenter estimated that the time to file 
an individual rule proposal with the CFTC is less than a third of the 
time required with the Commission. The commenter, however, did not 
offer data to support this statement and noted that it did not keep 
records of the time spent on individual rule filings. This commenter 
also suggested that the expedited review provisions of Section 19(b)(7) 
could be met by sending the Commission a copy of the same rule filing 
sent to the CFTC. In addition, with respect to the requirement of 
providing the Commission with a summary of any written comments 
received by the Security Futures Product Exchange or Limited Purpose 
National Securities Association relating to the proposed rule change, 
the commenter stated that providing copies of communications that 
relate to earlier versions of the proposal would be both burdensome and 
of little value to the Commission, and suggested that the summary be 
limited to substantive comments and communications about the proposed 
rule change. Despite the suggestions, the commenter acknowledged that 
some of the more detailed requirements imposed by Rule 19b-7 and Form 
19b-7 are dictated by the publication requirements imposed by the 
Exchange Act, but not by the CEA, and therefore, the commenter did not 
object to Rule 19b-7 and Form 19b-7.
---------------------------------------------------------------------------

    \1\ See NFA Letter.
---------------------------------------------------------------------------

    In response, the Commission notes that the comment letters that the 
Commission receives relating to a given proposed rule change are 
beneficial in that they provide an understanding of the issues involved 
in a proposed rule change and its anticipated impact on market 
participants. The Commission also notes that comment letters that 
address editing changes of earlier drafts of proposed rule changes need 
not be filed with the Commission.
    Two commenters stated that Rule 19b-7 and Form 19b-7 do not 
substantially expedite the rule filing process and would increase the 
regulatory burden on respondents.\219\ For instance, the commenters 
felt that it would cost an SRO substantially more staff resources and 
legal fees to complete the new form then it does to complete current 
Form 19b-4. As a whole, these commenters felt that the costs in 
complying with the new requirements of the proposal may outweigh the 
benefits. They suggested that the Commission retain a shortened Form 
19b-4 instead of using Form 19b-7, adopt a simple certification process 
like that proposed by the CFTC, remove legal uncertainty about the 
effectiveness of a rule filing being deemed filed based upon its 
completeness, and delete the assertion that the Commission will not 
necessarily make a final determination on whether a proposed rule 
change filed pursuant to Rule 19b-7 is in the public interest, 
including whether it has an impact on competition.\220\ Furthermore, 
the commenters stated that Form 19b-7 contains numerous unnecessary, 
vague, and overwhelming information requirements that would increase 
the burden on respondents exponentially.\221\ The commenters also 
stated that the conditions attached to a proposal being ``properly 
filed'' would create legal uncertainty for a respondent and cause 
respondents to spend a tremendous amount of additional staff and legal 
time on every proposed rule change.\222\ The commenters also felt that 
the requirement that a senior official of a respondent file a detailed 
certification as part of a proposed rule change is ``completely 
unrealistic and unworkable.'' \223\ The commenters recommended that the 
Commission instead require a simple certification that the official has 
reviewed the proposed rule change, without the detailed requirements, 
and state that the certification does not subject the official to 
liability if the certification was later found to be inconsistent with 
the securities laws.
---------------------------------------------------------------------------

    \219\ See CBOE Letter and CME Letter. One commenter applied its 
views of the Commission's proposed Rule 19b-6 and Form 19b-6 to Rule 
19b-7 and Form 19b-7 due to the virtually identical wording of the 
proposed rules and forms. See CBOE Letter. The other commenter 
adopted this commenter's view of Rule 19b-7 and Form 19b-7. See CME 
Letter.
    \220\ See CBOE Letter and CME Letter.
    \221\ The commenters stated that the new form would require an 
SRO to conduct a comprehensive review of the federal securities 
laws, its own rules, prior filings relating to the proposed rule, 
and prior Commission action impacting the proposed rule.
    \222\ The commenters recommended that every rule filing be 
deemed filed when submitted to the Commission unless it is severely 
incomplete.
    \223\ See CBOE Letter and CME Letter.
---------------------------------------------------------------------------

    The Commission has carefully considered the concerns raised by the 
commenters and, in response, has modified Rule 19b-7 and Form 19b-7 to 
more closely mirror the current rule filing process. Specifically, the 
Commission has decided not to adopt the certification requirement, nor 
the requirements that the filing describe how the proposed rule change 
relates to applicable provisions of the federal securities laws and the 
SRO rules. The Commission also has decided not to adopt the provision 
which stated that the effectiveness of a proposed rule change submitted 
pursuant to Section 19(b)(7) of the Exchange Act \224\ would not create 
an inference of whether the proposed rule change was in the public 
interest, including whether it had an impact on competition. The 
Commission notes that the differences observed by the commenters 
between the Commission's SRO rule filing process and that of the CFTC 
is, in large part, the direct result of the different statutory 
mandates under which each agency operates. As discussed above, the 
requirements of Section 5c of the CEA differs markedly from the 
requirements set forth in Section 19(b) of the Exchange Act, which 
specifically requires the Commission to review and publish all proposed 
rule changes of the Security Futures Product Exchanges and Limited 
Purpose National Securities Associations, and the Commission must 
follow this statutory mandate.
---------------------------------------------------------------------------

    \224\ 15 U.S.C. 78s(b)(7).
---------------------------------------------------------------------------

    Moreover, the Commission continues to believe that the costs 
associated with filing rule changes are predominately paperwork costs. 
As discussed above, the Commission estimates that the average paperwork 
cost per proposed rule change submitted on Form 19b-7 will be 
approximately $1,696.\225\ The Commission estimates each respondent 
will file 15 proposed rule changes per year and incur an annual average 
burden of 232.5 hours for a total annual average cost of approximately 
$25,440. The Commission also estimates that the average paperwork cost 
per respondent to file proposed rule changes that relate to margin, 
except for changes that result in higher margin levels, or that have 
been abrogated pursuant to Section

[[Page 43740]]

19(b)(7)(C) of the Exchange Act \226\ and refiled under Section 
19(b)(1) of the Exchange Act,\227\ will be approximately $3,660.\228\ 
In addition, the Commission estimates that the time associated with 
refiling an abrogated 19b-7 filing will delay the filing process by 30 
days.
---------------------------------------------------------------------------

    \225\ See supra Section V.B.4.
    \226\ 15 U.S.C. 78s(b)(7)(C).
    \227\ 15 U.S.C. 78s(b)(1).
    \228\ See supra Section V.C.4.
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    The Commission continues to believe that the rule filing process 
adopted today for Security Futures Product Exchanges and Limited 
Purpose National Securities Associations will enable the Commission and 
the markets to fulfill their statutory obligations and 
responsibilities, while imposing the minimum amount of burden necessary 
to fulfill the directives of the Exchange Act. As discussed above, the 
Commission has modified Rule 19b-7 and Form 19b-7 from the proposal to 
address concerns raised by commenters.

VII. Consideration of the Burden on Competition, and Promotion of 
Efficiency, Competition, and Capital Formation

    Section 3(f) of the Exchange Act \229\ requires the Commission, 
whenever it is engaged in rulemaking and is required to consider or 
determine whether an action is necessary or appropriate in the public 
interest, to consider whether the action will promote efficiency, 
competition, and capital formation. In addition, Section 23(a)(2) of 
the Exchange Act \230\ requires the Commission, when promulgating rules 
under the Exchange Act, to consider the impact any such rules would 
have on competition. Section 23(a)(2) further provides that the 
Commission may not adopt a rule that would impose a burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Exchange Act. In addition, in the Proposing Release, the 
Commission requested comment on these issues.\231\
---------------------------------------------------------------------------

    \229\ 15 U.S.C. 78c(f).
    \230\ 15 U.S.C. 78w(a)(2).
    \231\ See Proposing Release, supra note 13.
---------------------------------------------------------------------------

    Two comments were received that specifically addressed the 
proposal's effect on competition. The Commission has considered these 
comments and reviewed the proposed rules in light of the standards set 
forth in sections 3(f) and 23(a)(2) of the Exchange Act.\232\
---------------------------------------------------------------------------

    \232\ 15 U.S.C. 78c(f) and 78w(a)(2).
---------------------------------------------------------------------------

    The first commenter asserted that a competitive disparity would 
result because options exchanges and Security Futures Product 
Exchanges, although direct competitors, will be subject to different 
rule filing processes.\233\ The commenter noted that, currently, the 
options exchanges are subject to Rule 19b-4,\234\ pursuant to which 
they must file proposed rule changes and many of these filings are 
subject to Commission approval. By contrast, Security Futures Product 
Exchanges would, under the Commission's proposal, file the vast 
majority of their proposed rule changes pursuant to Rule 19b-7, 
pursuant to which these rule changes would be effective on filing and 
would not require Commission approval. The commenter urged the 
Commission to eliminate this disparity in the rule filing process.
---------------------------------------------------------------------------

    \233\ See CBOE Letter. A second commenter, although not 
commenting on proposed Rule 19b-7 itself, expressed concurrence with 
the views regarding proposed Rule 19b-7 expressed in the CBOE 
Letter. See CME Letter.
    \234\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    The Commission does not believe that the rule filing process for 
Security Futures Product Exchanges and Limited Purpose National 
Securities Associations will impose any burden on competition not 
necessary or appropriate in furtherance of the purposes of the Exchange 
Act. First, the statute provides for different procedures for rules 
filed by Security Futures Product Exchanges as compared to exchanges 
registered pursuant to section 6(a) and national securities 
associations registered pursuant to section 15A(a) of the Exchange Act. 
Second, in response to concerns raised by commenters, Rule 19b-7 and 
Form 19b-7 have been modified to parallel existing Rule 19b-4 and Form 
19b-4, respectively. Third, the Exchange Act provides that most 
proposed rule changes filed by Security Futures Product Exchanges 
pursuant to Rule 19b-7 \235\ may become effective without Commission 
approval, although this is not the case for many proposed rule changes 
submitted by the existing options exchanges pursuant to Rule 19b-
4.\236\ Thus, the Commission believes that adopting Rule 19b-7 in the 
manner that it has furthers the purposes of the Exchange Act in a 
manner consistent with competitive considerations. The Commission 
continues to study means by which to streamline the rule filing process 
for existing national securities exchanges and national securities 
associations, but adopting Rule 19b-7 will, in itself, have no adverse 
effects on competition not necessary or appropriate in furtherance of 
the purposes of the Exchange Act.
---------------------------------------------------------------------------

    \235\ 17 CFR 240.19b-7.
    \236\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    The second commenter asserted that, if the Commission's proposed 
rules with regard to notice registration were adopted, it would be more 
difficult for a futures market to notice register with the Commission 
than it would be for a securities market to become notice-designated by 
the CFTC. This commenter concluded that a competitive disparity would 
thereby result.\237\
---------------------------------------------------------------------------

    \237\ See CBOT Letter. Another commenter, although not 
specifically discussing competitive considerations, stated that the 
Commission's proposal regarding notice registration would ``require 
a wasteful duplication of information that is on public file with 
the CFTC.'' CME Letter.
---------------------------------------------------------------------------

    The Commission does not believe that the notice registration 
process as adopted will impose any burden on competition not necessary 
or appropriate in furtherance of the purposes of the Exchange Act. The 
Exchange Act, as amended by the CFMA, specifically contemplates a 
notice registration process for futures markets that desire to register 
as Security Futures Product Exchanges, and gives the Commission the 
authority to require them to provide information ``comparable to the 
information and documents required for national securities exchanges.'' 
\238\ The Commission believes that the notice registration process as 
adopted furthers the purposes of the Exchange Act in an appropriate 
manner. Moreover, Security Futures Product Exchanges will be subject to 
fewer reporting burdens imposed by the Commission than the existing 
securities exchanges, their direct competitors in the market for 
security futures products. Form 1-N (for Security Futures Product 
Exchanges) requires fewer exhibits than Form 1 (for other national 
securities exchanges), and, more importantly, Form 1-N is effective 
upon filing and does not require Commission approval, unlike Form 1. In 
addition, although the notice and amendments required by Rule 6a-4 
\239\ entail certain legal and clerical costs, these requirements have 
been carefully tailored to minimize the costs. The Commission 
concludes, therefore, that the anticompetitive effects of the notice 
registration process for Security Futures Product Exchanges--if any--
would be minimal.
---------------------------------------------------------------------------

    \238\ 15 U.S.C. 78f(g)(2)(A).
    \239\ 17 CFR 240.6a-4.
---------------------------------------------------------------------------

    The Commission received no comments specifically relating to 
capital formation and one comment relating to efficiency.\240\ This 
commenter described the rule filing process currently imposed by the 
CFTC on entities that will become Security Futures Product Exchanges 
and Limited Purpose National Securities Associations, and recommended 
that the Commission ultimately accept these CFTC filings,

[[Page 43741]]

with minor modifications, to satisfy the Commission's need to be 
informed of such entities' proposed rule changes. The commenter noted, 
however, that it ``is aware of the short deadlines that the CFMA 
imposes and recognizes that, given the time constraints SEC staff is 
working under, it may be more efficient in the short-term for the SEC 
to work from the model [for proposed rule changes] that it already has 
in place.'' The commenter also stated that it understood that some of 
the more detailed requirements imposed by proposed Rule 19b-7 and 
proposed Form 19b-7 were dictated by publication requirements imposed 
by the Exchange Act but not the Commodities Exchange Act. On this 
basis, the commenter stated that it would not object to the 
Commission's proposed Rule 19b-7 and proposed Form 19b-7.
---------------------------------------------------------------------------

    \240\ See NFA Letter.
---------------------------------------------------------------------------

    The Commission continues to believe that the proposed rules will 
have a minimal effect on efficiency and capital formation. The 
Commission acknowledges that there are certain legal and clerical costs 
involved in notice registering and filing proposed rule changes with 
the Commission. The resources employed to meet these costs will not 
otherwise be available to Security Futures Product Exchanges and 
Limited Purpose National Securities Associations for other uses. 
Nevertheless, because filings made pursuant to Rules 6a-4 and 19b-7 
\241\ are effective on filing and do not require Commission approval, 
the Commission believes that the requirement to make these filings will 
have no substantial effect on efficiency.
---------------------------------------------------------------------------

    \241\ 17 CFR 240.6a-4 and 240.19b-7.
---------------------------------------------------------------------------

VIII. Summary of Regulatory Flexibility Act Certification

    Pursuant to Section 605(b) of the Regulatory Flexibility Act,\242\ 
the Acting Chairman of the Commission certified that the adopted rules, 
forms, and conforming amendments would not have a significant economic 
impact on a substantial number of small entities. This certification, 
including the reasons therefore, was attached to the Proposing Release 
No. 34-44279 (May 8, 2001) as Appendix A. The Commission solicited 
comments concerning the impact on small entities and the Regulatory 
Flexibility Act certification, but received no comments.
---------------------------------------------------------------------------

    \242\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------

IX. Statutory Authority

    The Commission is adopting the rules pursuant to its authority 
under Exchange Act sections 3(b), 5, 6, 11, 11A, 15A, 17(a) and (b), 
19, and 23(a).

List of Subjects

17 CFR Part 202

    Administrative practice and procedure, Securities.

17 CFR Part 240

    Brokers-dealers, Fraud, Issuers, Reporting and recordkeeping 
requirements, Securities.

17 CFR Part 249

    Reporting and recordkeeping requirements, Securities.

Text of the Rules

    For the reasons set out in the preamble, Title 17, Chapter II of 
the Code of Federal Regulations is amended as follows:

PART 202--INFORMAL AND OTHER PROCEDURES

    1. The authority citation for part 202 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77s, 77t, 78d-1, 78u, 78w, 78ll(d), 79r, 
79t, 77sss, 77uuu, 80a-37, 80a-41, 80b-9, and 80b-11, unless 
otherwise noted.
* * * * *

    2. The authority citation following Sec. 202.3 is removed.

    3. Section 202.3 is amended by adding paragraph (b)(3) to read as 
follows:


Sec. 202.3  Processing of filings.

* * * * *
    (b)(1) * * *
    (3) Notice forms for registration as national securities exchanges 
pursuant to Section 6(g)(1) of the Securities Exchange Act of 1934 (15 
U.S.C. 78f(g)(1)) filed with the Commission are routed to the Division 
of Market Regulation, which examines these notices to determine whether 
all necessary information has been supplied and whether all other 
required documents have been furnished in proper form. Defective 
notices may be returned with a request for correction or held until 
corrected before being accepted as a filing.

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    4. The general authority citation for part 240 is revised to read 
as follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 
78w, 78x, 78ll, 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-
3, 80b-4, and 80b-11, unless otherwise noted.

* * * * *

    5. The authority citations following Secs. 240.6a-2 and 240.6a-3 
are removed.

    6. Section 240.6a-2 is amended by revising paragraph (e) and adding 
paragraph (f) to read as follows:


Sec. 240.6a-2  Amendments to application.

* * * * *
    (e) The Commission may exempt a national securities exchange, or an 
exchange exempted from such registration based on limited volume, from 
filing the amendment required by this section for any affiliate or 
subsidiary listed in Exhibit C of the exchange's application for 
registration, as amended, that either:
    (1) Is listed in Exhibit C of the application for registration or 
notice of registration, as amended, of one or more other national 
securities exchanges; or
    (2) Was an inactive subsidiary throughout the subsidiary's latest 
fiscal year. Any such exemption may be granted upon terms and 
conditions the Commission deems necessary or appropriate in the public 
interest or for the protection of investors, provided however, that at 
least one national securities exchange shall be required to file the 
amendments required by this section for an affiliate or subsidiary 
described in paragraph (e)(1) of this section.
    (f) A national securities exchange registered pursuant to Section 
6(g)(1) of the Act (15 U.S.C. 78f(g)(1)) shall be exempt from the 
requirements of this section.

    7. Section 240.6a-3 is amended by adding paragraph (c) to read as 
follows:


Sec. 240.6a-3  Supplemental material to be filed by exchanges.

* * * * *
    (c) A national securities exchange registered pursuant to Section 
6(g)(1) of the Act (15 U.S.C. 78f(g)(1)) shall be exempt from the 
requirements of this section.

    8. Section 240.6a-4 is added to read as follow:


Sec. 240.6a-4  Notice of registration under Section 6(g) of the Act, 
amendment to such notice, and supplemental materials to be filed by 
exchanges registered under Section 6(g) of the Act.

    (a) Notice of registration. (1) An exchange may register as a 
national securities exchange solely for the purposes of trading 
security futures products by filing Form 1-N (Sec. 249.10 of this 
chapter) (``notice of registration''), in accordance with the 
instructions contained therein, if:

[[Page 43742]]

    (i) The exchange is a board of trade, as that term in defined in 
the Commodity Exchange Act (7 U.S.C. 1a(2)), that:
    (A) Has been designated a contract market by the Commodity Futures 
Trading Commission and such designation is not suspended by order of 
the Commodity Futures Trading Commission; or
    (B) Is registered as a derivative transaction execution facility 
under Section 5a of the Commodity Exchange Act (7 U.S.C. 7a) and such 
registration is not suspended by the Commodity Futures Trading 
Commission; and
    (ii) Such exchange does not serve as a market place for 
transactions in securities other than:
    (A) Security futures products; or
    (B) Futures on exempted securities or on groups or indexes of 
securities or options thereon that have been authorized under Section 
2(a)(1)(C) of the Commodity Exchange Act (7 U.S.C. 2a).
    (2) Promptly after the discovery that any information filed on Form 
1-N (Sec. 249.10 of this chapter) was inaccurate when filed, the 
exchange shall file with the Commission an amendment correcting such 
inaccuracy.
    (b) Amendment to notice of registration. (1) A national securities 
exchange registered pursuant to Section 6(g)(1) of the Act (15 U.S.C. 
78f(g)(1)) (``Security Futures Product Exchange'') shall file an 
amendment to Form 1-N (Sec. 249.10 of this chapter), which shall set 
forth the nature and effective date of the action taken and shall 
provide any new information and correct any information rendered 
inaccurate, on Form 1-N (Sec. 249.10 of this chapter), within:
    (i) Ten days after any action is taken that renders inaccurate, or 
that causes to be incomplete, any information filed on the Execution 
Page of Form 1-N (Sec. 249.10 of this chapter), or amendment thereto; 
or
    (ii) 30 days after any action is taken that renders inaccurate, or 
that causes to be incomplete, any information filed as part of Exhibit 
F to Form 1-N (Sec. 249.10 of this chapter), or any amendments thereto.
    (2) A Security Futures Product Exchange shall maintain records 
relating to changes in information required in Exhibits C and E to Form 
1-N (Sec. 249.10 of this chapter) which shall be current of as of the 
latest practicable date, but shall, at a minimum, be up-to-date within 
30 days. A Security Futures Product Exchange shall make such records 
available to the Commission and the public upon request.
    (3) On or before June 30, 2002, and by June 30 every year 
thereafter, a Security Futures Product Exchange shall file, as an 
amendment to Form 1-N (Sec. 249.10 of this chapter), Exhibits F, H, and 
I, which shall be current of as of the latest practicable date, but 
shall, at a minimum, be up-to-date within three months as of the date 
the amendment is filed.
    (4) On or before June 30, 2004, and by June 30 every three years 
thereafter, a Security Futures Product Exchange shall file, as an 
amendment to Form 1-N (Sec. 249.10 of this chapter), complete Exhibits 
A, B, C, and E, which shall be current of as of the latest practicable 
date, but shall, at a minimum, be up-to-date within three months as of 
the date the amendment is filed.
    (5)(i) If a Security Futures Product Exchange, on an annual or more 
frequent basis, publishes, or cooperates in the publication of, any of 
the information required to be filed by paragraphs (b)(3) and (b)(4) of 
this section, in lieu of filing such information, a Security Futures 
Product Exchange may satisfy this filing requirement by:
    (A) Identifying 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 of such 
publication; and
    (B) Certifying to the accuracy of such information as of its 
publication date.
    (ii) If a Security Futures Product Exchange keeps the information 
required under paragraphs (b)(3) and (b)(4) of this section up-to-date 
and makes it available to the Commission and the public upon request, 
in lieu of filing such information, a Security Futures Product Exchange 
may satisfy this filing requirement by certifying that the information 
is kept up-to-date and is available to the Commission and the public 
upon request.
    (iii) If the information required to be filed under paragraphs 
(b)(3) and (b)(4) of this section is available continuously on an 
Internet web site controlled by a Security Futures Product Exchange, in 
lieu of filing such information with the Commission, such Security 
Futures Product Exchange may satisfy this filing requirement by:
    (A) Indicating the location of the Internet web site where such 
information may be found; and
    (B) Certifying that the information available at such location is 
accurate as of its date.
    (6)(i) The Commission may exempt a Security Futures Product 
Exchange from filing the amendment required by this section for any 
affiliate or subsidiary listed in Exhibit C to Form 1-N (Sec. 249.10 of 
this chapter), as amended, that either:
    (A) Is listed in Exhibit C to Form 1 (Sec. 249.1 of this chapter) 
or to Form 1-N (Sec. 249.10 of this chapter), as amended, of one or 
more other national securities exchanges; or
    (B) Was an inactive affiliate or subsidiary throughout the 
affiliate's or subsidiary's latest fiscal year.
    (ii) Any such exemption may be granted upon terms and conditions 
the Commission deems necessary or appropriate in the public interest or 
for the protection of investors, provided however, that at least one 
national securities exchange shall be required to file the amendments 
required by this section for an affiliate or subsidiary described in 
paragraph (b)(6)(i) of this section.
    (7) If a Security Futures Product Exchange has filed documents with 
the Commodity Futures Trading Commission, to the extent that such 
documents contain information satisfying the Commission's informational 
requirements, copies of such documents may be filed with the Commission 
in lieu of the required written notice.
    (c) Supplemental material to be filed by Security Futures Product 
Exchanges. (1)(i) A Security Futures Product Exchange shall file with 
the Commission any material related to the trading of security futures 
products (including notices, circulars, bulletins, lists, and 
periodicals) issued or made generally available to members of, 
participants in, or subscribers to, the exchange. Such material shall 
be filed with the Commission within ten days after issuing or making 
such material available to members, participants, or subscribers.
    (ii) If the information required to be filed under paragraph 
(c)(1)(i) of this section is available continuously on an Internet web 
site controlled by an exchange, in lieu of filing such information with 
the Commission, such exchange may:
    (A) Indicate the location of the Internet web site where such 
information may be found; and
    (B) Certify that the information available at such location is 
accurate as of its date.
    (2) Within 15 days after the end of each calendar month, a Security 
Futures Product Exchange shall file a report concerning the security 
futures products traded on such exchange during the previous calendar 
month. Such a report shall:
    (i) For each contract of sale for future delivery of a single 
security, the number

[[Page 43743]]

of contracts traded on such exchange during the relevant calendar month 
and the total number of shares underlying such contracts traded; and
    (ii)For each contract of sale for future delivery of a narrow-based 
security index, the number of contracts traded on such exchange during 
the relevant calendar month and the total number of shares represented 
by the index underlying such contracts traded.

    9. Section 240.19b-4 is amended by revising paragraph (a) to read 
as follows:


Sec. 240.19b-4  Filing with respect to proposed rule changes by self-
regulatory organizations.

    (a) Filings with respect to proposed rule changes by a self-
regulatory organization, except filings with respect to proposed rule 
changes by self-regulatory organizations submitted pursuant to Section 
19(b)(7) of the Act (15 U.S.C. 78s(b)(7)), shall be made on Form 19b-4 
(Sec. 249.819 of this chapter).
* * * * *
    10. Section 240.19b-7 is added to read as follows:


Sec. 240.19b-7  Filings with respect to proposed rule changes submitted 
pursuant to Section 19(b)(7) of the Act.

    (a) Filings with respect to proposed rule changes required to be 
submitted pursuant to Section 19(b)(7) of the Act (15 U.S.C. 
78s(b)(7)), shall be made on Form 19b-7 (Sec. 249.822 of this chapter). 
The Commission will promptly publish a notice of filing of such 
proposed rule change.
    (b) A proposed rule change will not be deemed filed on the date it 
is received by the Commission unless:
    (1) A completed Form 19b-7 (Sec. 249.822 of this chapter) is 
submitted; and
    (2) In order to elicit meaningful comment, it is accompanied by:
    (i) A clear and accurate statement of the basis and purpose of such 
rule change, including the impact on competition or efficiency, if any; 
and
    (ii) A summary of any written comments (including e-mail) received 
by the self-regulatory organization on the proposed rule change.
    (c) Self-regulatory organizations shall retain at their principle 
place of business a file, available to interested persons for public 
inspection and copying, of all filings made pursuant to this section 
and all correspondence and other communications reduced to writing 
(including comment letters) to and from such self-regulatory 
organization concerning such filing, whether such correspondence and 
communications are received or prepared before or after the filing of 
the proposed rule change.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

    11. The authority citation for Part 249 continues to read in part 
as follows:

    Authority: 15 U.S.C. 78a, et seq., unless otherwise noted;

* * * * *

    12. Section 249.10 and Form 1-N are added to read as follows:

    Note: Form 1-N is attached as Appendix A to this document. Form 
1-N will not ppear in the Code of Federal Regulations.

Sec. 249.10  Form 1-N for notice registration as a national securities 
exchange.

    This form shall be used for notice, and amendments to the notice, 
to permit an exchange to register as a national securities exchange 
solely for the purposes of trading security futures products pursuant 
to Section 6(g) of the Act (15 U.S.C. 78f(g)).

    13. Section 249.819 is revised to read as follows:


Sec. 249.819  Form 19b-4, for filings with respect to proposed rule 
changes by all self-regulatory organizations, pursuant to Section 
19(b)(1) of the Securities Exchange Act of 1934.

    This form shall be used by all self-regulatory organizations, as 
defined in Section 3(a)(26) of the Securities Exchange Act of 1934 (15 
U.S.C. 78c(a)(26)), to file proposed rule changes with the Commission 
pursuant to Section 19(b)(1) of that Act (15 U.S.C. 78s(b)(1)) and Rule 
19b-4 (17 CFR 240.19b-4) thereunder.

    14. Form 19b-4 (referenced in Sec. 249.819) is amended by:
    a. In General Instruction A, ``Use of the Form,'' revise the first 
sentence;
    b. In General Instruction C, ``Documents Comprising the Completed 
Form,'' revise the last sentence;
    c. In General Instruction E, ``Completion of Action by the Self-
Regulatory Organization on the Proposed Rule Change,'' revise the last 
two sentences;
    d. In General Instruction F, ``Signature and Filing of Completed 
Form,'' revise the first sentence;
    e. In Information to Be Included in the Completed Form, item 3 
``Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change,'' revise the second and 
third sentences of the introductory text and paragraph (b);
    f. In Information to Be Included in the Completed Form revise item 
6, ``Extension of Time Period for Commission Action;''
    g. In Information to Be Included in the Completed Form, item 7, 
``Basis for Summary Effectiveness Pursuant to Section 19(b)(3) or for 
Accelerated Effectiveness Pursuant to Section 19(b)(2),'' revise the 
title and paragraph (d); and
    h. In Exhibit 1, Information to Be Included in the Completed 
Notice, add two undesignated paragraphs to the end of Item III, ``Date 
of Effectiveness of the Proposed Rule Change and Timing for Commission 
Action.''
    The revisions and additions read as follows:


    Note: Form 19b-4 and these amendments do not appear in the Code 
of Federal Regulations.

Form 19b-4

* * * * *

General Instructions

A. Use of the Form

    This form shall be used for filings of proposed rule changes by all 
self-regulatory organizations pursuant to Section 19(b) of the 
Securities Exchange Act of 1934 (the ``Act'') except filings with 
respect to proposed rule changes by self-regulatory organizations 
submitted pursuant to Section 19(b)(7) of the Act. * * *
* * * * *

C. Documents Comprising the Completed Form

    * * * Each filing shall be marked on the facing sheet with the 
initials of the self-regulatory organization, the four-digit year, and 
the number of the filing for the year.
* * * * *

E. Completion of Action by the Self-Regulatory Organization on the 
Proposed Rule Change

    * * * Nevertheless, proposed rule changes (other than proposed rule 
changes that are to take, or to be put into, effect pursuant to Section 
19(b)(3) of the Act) may be initially filed before the completion of 
all such action if the self-regulatory organization consents, under 
Item 6 of this form, to an extension of the period of time specified in 
Section 19(b)(2) or Section 19(b)(7)(D) of the Act until at least 
thirty-five days after the self-regulatory organization has filed an 
appropriate amendment setting forth the taking of all such action. If a 
proposed rule change to be filed for review under Section 19(b)(2) or 
Section 19(b)(7)(D) of the Act is in preliminary form, the self-
regulatory organization may elect to file initially Exhibit 1 setting 
forth a description of the subjects and issues expected to be involved.

[[Page 43744]]

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, NW., Washington, DC 20549-1001; in the case of filings by 
securities exchanges registered pursuant to Section 6(g)(1) of the Act 
and national securities associations registered pursuant to Section 
15A(k) of the Act, the Assistant Director for Security Futures 
Products, Division of Market Regulation, Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 20549-1003. * * *
* * * * *

Information To Be Included in the Completed Form

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

    * * * With respect to proposed rule changes filed pursuant to 
Section 19(b)(1) of the Act, except for proposed rule changes that have 
been abrogated pursuant to Section 19(b)(7)(C) of the Act, the 
statement should be sufficiently detailed and specific to support a 
finding under Section 19(b)(2) of the Act that the proposed rule change 
is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to the self-regulatory organization. 
With respect to proposed rule changes filed pursuant to Section 
19(b)(1) of the Act that have been abrogated pursuant to Section 
19(b)(7)(C) of the Act, the statement should be sufficiently detailed 
and specific to support a finding under Section 19(b)(7)(D) of the Act 
that the proposed rule change does not unduly burden competition or 
efficiency, does not conflict with the securities laws, and is not 
inconsistent with the public interest or the protection of investors. * 
* *
* * * * *
    (b) With respect to proposed rule changes filed pursuant to both 
Sections 19(b)(1) and 19(b)(2) of the Act, explain why the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to the self-regulatory 
organization. A mere assertion that the proposed rule change is 
consistent with those requirements is not sufficient. With respect to 
proposed rule changes filed pursuant Section 19(b)(1) of the Act that 
have been abrogated pursuant to Section 19(b)(7)(C) of the Act, explain 
why the proposed rule change does not unduly burden competition or 
efficiency, does not conflict with the securities laws, and is not 
inconsistent with the public interest and the protection of investors, 
in accordance with Section 19(b)(7)(D) of the Act. A mere assertion 
that the proposed rule change satisfies these requirements is not 
sufficient. In the case of a registered clearing agency, also explain 
how the proposed rule change will be implemented consistently with the 
safeguarding of securities and funds in its custody or control or for 
which it is responsible. Certain limitations that the Act imposes on 
self-regulatory organizations are summarized in the notes that follow.
* * * * *

6. Extension of Time for Commission Action

    State whether the self-regulatory organization consents to an 
extension of the time period specified in Section 19(b)(2) or Section 
19(b)(7)(D) of the Act and the duration of the extension, if any, to 
which the self-regulatory organization consents.

    Note. The self-regulatory organization may elect to consent to 
an extension of the time period specified in Section 19(b)(2) or 
Section 19(b)(7)(D) of the Act until it shall file an amendment 
which specifically states that the time period specified in Section 
19(b)(2) or Section 19(b)(7)(D) of the Act shall begin to run on the 
date of filing such amendment.

* * * * *

7. Basis for Summary Effectiveness Pursuant to Section 19(b)(3) or for 
Accelerated Effectiveness Pursuant to Section 19(b)(2) or Section 
19(b)(7)(D)

* * * * *
    (d) If accelerated effectiveness pursuant to Section 19(b)(2) or 
Section 19(b)(7)(D) of the Act is requested, provide a statement 
explaining why there is good cause for the Commission to accelerate 
effectiveness.
* * * * *

Exhibit 1

* * * * *

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

* * * * *
    (If the proposed rule change is to be considered by the Commission 
pursuant to Section 19(b)(7)(D) of the Act, the following paragraph 
should be used.)
    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve such proposed rule change, or
    (B) after consultation with the Commodity Futures Trading 
Commission, institute proceedings to determine whether the proposed 
rule change should be disapproved.
* * * * *

    15. Section 249.822 and Form 19b-7 are added to read as follows:


    Note: Form 19b-7 is attached as Appendix B to this document. 
Form 19b-7 will not appear in the Code of Federal Regulations.

Sec. 249.822  Form 19b-7, for filings with respect to proposed rule 
changes by all self-regulatory organizations, pursuant to Section 
19(b)(7)(A) of the Securities Exchange Act of 1934.

    This form shall be used by all self-regulatory organizations, as 
defined in Section 3(a)(26) of the Securities Exchange Act of 1934 (15 
U.S.C. 78c(a)(26)), to file proposed rule 77 changes with the 
Commission pursuant to Section 19(b)(7) of that Act (15 U.S.C. 
78s(b)(7)) and Rule 19b-7 (17 CFR 240.19b-7) thereunder.

    Dated: August 13, 2001.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.

BILLING CODE 8010-01-U

[[Page 43745]]

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[[Page 43746]]


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[[Page 43748]]


[GRAPHIC] [TIFF OMITTED] TR20AU01.009


[[Page 43749]]


[GRAPHIC] [TIFF OMITTED] TR20AU01.010

BILLING CODE 8010-01-C

[[Page 43750]]

Appendix B

    Note: Appendix B to the preamble will not appear in the Code of 
Federal Regulations.

OMB Approval

OMB Number: 3235-0553
Expires: July 31, 2004
Estimated average burden hours 15.5

FORM 19b-7

File No. SR------------------------------------------------------------
Amendment No.----------------------------------------------------------

(If Applicable)*

Securities and Exchange Commission, Washington, DC 20549, Form 19b-7

Proposed Rule Change by

----------------------------------------------------------------------
(Exact Name of Self-Regulatory Organization)*

Pursuant to Rule 19b-7 Under the Securities Exchange Act of 1934

*(Do not include parenthetical material in completed form)

    Pursuant to the requirements of the Securities Exchange Act of 
1934, the self-regulatory organization has duly caused this filing 
to be signed on its behalf by the undersigned thereunto duly 
authorized.

(Self-Regulatory Organization)

By:--------------------------------------------------------------------
(Signature. Print name and title of signer below signature.)

General Instructions

When Should This Form Be Used?

    This form must be used for filings of proposed rule changes by 
all self-regulatory organizations (``SROs'') that are required to 
submit proposed rule changes pursuant to Section 19(b)(7) of the 
Securities Exchange Act of 1934 (``Act''). National securities 
exchanges registered pursuant to Section 6(g) of the Act, and 
limited purpose national securities associations registered pursuant 
to Section 15A(k) of the Act, are SROs for purposes of this form.

Terms

    Unless the context clearly indicates otherwise, terms used in 
this form have the meaning ascribed to them in the Act, as amended, 
and Rule 19b-7 thereunder.

Format Requirements

    The Notice section of this Form 19b-7 must comply with the 
guidelines for publication in the Federal Register. The Office of 
the Federal Register (``OFR'') [http://www.nara.gov/fedreg] offers 
guidance on Federal Register publication requirements in the Federal 
Register Document Drafting Handbook, October 1998 Revision. For 
example, all references to the federal securities laws and the 
Commodity Exchange Act (``CEA'') must include the corresponding cite 
to the United States Code in a footnote. All references to the 
Securities and Exchange Commission (``SEC'' or ``Commission'') and 
Commodity Futures Trading Commission (``CFTC'') rules must include 
the corresponding cite to the Code of Federal Regulations in a 
footnote. All references to Securities Exchange Act Releases and 
CFTC decisions, orders, or letters must include the release number, 
release date, Federal Register cite, Federal Register date, and 
corresponding file number (e.g., SR-[SRO]-xxxx-xx). In addition, the 
OFR's Drafting Legal Documents is a general style guide to clear and 
concise legal writing.

When Is a Proposed Rule Change Considered Filed?

    To be considered filed, an SRO must include with its proposed 
rule change: A completed Form 19b-7 that includes the cover sheet, 
Notice, and applicable Exhibits. Each cover sheet, Notice and 
Exhibit must include a file number that is assigned by the SRO, 
which includes the initials of the SRO, the 4-digit year and the 
number of the filing for that year (SR-[SRO]-XXXX-XX). The proposed 
rule change will be considered filed on the date that the Commission 
receives it if the filing complies with all requirements of this 
form and the requirements of Rule 19b-7. Any filing that does not 
comply with all of the requirements of this form will not be 
considered filed with the Commission and will be returned to the 
SRO.
    The SRO must provide all required information, presented in a 
clear and comprehensible manner, to enable the public to provide 
meaningful comment on the proposal. This information also is 
necessary for the Commission to determine whether abrogation of the 
proposal is appropriate because it unduly burdens competition or 
efficiency, conflicts with the securities laws, or is inconsistent 
with the public interest and the protection of investors. It is the 
responsibility of the SRO to prepare Items I, II, and III of the 
Notice.

What Other Information Must an SRO Include When Filing a Proposed 
Rule Change?

Exhibit 1

    (a) Copies of all notices issued by the SRO soliciting comment 
on the proposed rule change.
    (b) Copies of all written comments on the proposed rule change 
received by the SRO, even if the SRO did not solicit comments. All 
comments should be presented in alphabetical order, together with an 
alphabetical listing of the commenters.
    (c) Any transcript of comments on the proposed rule change made 
at any public meeting or, if a transcript is not available, a 
summary of comments on the proposed rule change made at any meeting.
    (d) Any correspondence or other communications reduced to 
writing (including comment letters and e-mails) concerning the 
proposed rule change prepared or received by the SRO. All 
correspondence or other communications should be presented in 
alphabetical order together with an alphabetical listing of the 
authors.
    (e) If after the proposed rule change is filed but before the 
Commission takes final action on it, the SRO prepares or receives 
any correspondence or other communications reduced to writing 
(including comment letters and e-mails) concerning the proposed rule 
change, copies of the communications must be filed as previously 
instructed in paragraph (b) above.

Exhibit 2

    Copies of any form, report, or questionnaire that the SRO 
proposes to use to help implement or operate the proposed rule 
change, or that is referred to in the proposed rule change.

Exhibit 3

    A statement of the SRO that describes the procedures of the SRO 
taken with regards to the proposed rule change. Such statement must 
include:
    (a) A description of the action taken on the proposed rule 
change by the members or board of directors or other governing body 
of the SRO.
    (b) The name(s) and telephone number(s) of the persons on the 
staff of the SRO prepared to respond to questions and comments on 
the proposed rule change.

Exhibit 4

    Text of the proposed rule change. Indicate new language by 
underscoring and language to be deleted by brackets. If the proposed 
rule change will have any direct effect, or significant indirect 
effect, on the application of any other rule of the SRO, set forth 
the designation or title of any such rule and describe the 
anticipated effect of the proposed rule on the application of such 
other rule. If the proposed rule change amends an existing rule of 
the SRO, set forth the file numbers for any prior filings with 
respect to the existing rule.

Exhibit 5

    A copy of any certification submitted to the CFTC pursuant to 
Section 5c(c) of the Commodity Exchange Act; a copy of any request 
submitted to the CFTC for a determination by the CFTC that review of 
the proposed rule change is not necessary and any indication from 
the CFTC that it has determined that review of the proposed rule 
change is not necessary; or a copy of any request submitted to the 
CFTC for approval of the proposed rule change and any indication 
received from the CFTC that the proposed rule change has been 
approved.

What To Do if There Is an Amendment to the Proposed Rule Change

    If information on the Form 19b-7 Notice or any applicable 
Exhibit is or becomes inaccurate or incomplete before the proposed 
rule change becomes effective, the SRO must file correcting 
amendments. Nine copies of amendments, including one manually signed 
copy, must be provided. If an amendment alters the text of the 
proposed rule change as it appeared prior to the amendment, the 
amendment must mark the text, in any convenient manner, to indicate 
additions to and deletions from the immediately preceding filing. 
The purpose of this requirement is to permit the staff to 
immediately identify any changes made to the previous version of the 
rule text.

Where and How To File

    Nine copies of Form 19b-7 and all applicable exhibits must be 
filed with the Office of Market Supervision, Division of

[[Page 43751]]

Market Regulation, Securities and Exchange Commission, 450 Fifth 
Street, NW., Washington DC 20549-1003. The chief executive officer, 
general counsel, or other officer or director of the SRO that 
exercises similar authority must manually sign at least one copy of 
the completed Form 19b-7. Please note that any information filed by 
the SRO requesting confidential treatment must be filed on paper 
with the Commission.

FORM 19b-7  NOTICE

Securities and Exchange Commission
(Release No. 34-; File No. SR-)
Self-Regulatory Organization; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by [Name of Self-Regulatory 
Organization] Relating to [brief description of proposed rule 
change]

    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 
1934 (``Act''),\1\ and Rule 19b-7 under the Act,\2\ notice is hereby 
given that on [date \3\], the [name of self-regulatory organization] 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons. [Name 
of self-regulatory organization] also has filed the proposed rule 
change with the Commodity Futures Trading Commission (``CFTC''). 
(Section 19(b)(7)(B) of the Act provides that a proposed rule change 
may take effect upon the occurrence of one of three events. The 
self-regulatory organization should include one of the following 
sentences, whichever is applicable.)
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 17 CFR 240.19b-7.
    \3\ To be completed by the Commission. This date will be the 
date on which the Commission receives the proposed rule change 
filing if the filing complies with all requirements of this form. 
See General Instructions.
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    The [name of self-regulatory organization] filed a written 
certification with the CFTC under Section 5c(c) of the Commodity 
Exchange Act on [date]; or
    The [name of self-regulatory organization], on [date], has 
requested that the CFTC make a determination that review of the 
proposed rule change of the [self-regulatory organization] is not 
necessary. The CFTC has [made such determination on [date]]; or [has 
not made such determination]; or
    The [name of self-regulatory organization], on [date] submitted 
the proposed rule change to the CFTC for approval. The CFTC 
[approved the proposed rule change on [date]]; or [has not approved 
the proposed rule change].

I. Self-Regulatory Organization's Description of the Proposed Rule 
Change

    (Supply a brief statement of the terms of substance of the 
proposed rule change. If the proposed rule change is relatively 
brief, a separate statement need not be prepared, and the text of 
the proposed rule change may be inserted in lieu of the statement of 
the terms of substance. If the proposed rule change amends an 
existing rule, indicate the changes in the rule by brackets for 
words to be deleted and underscoring for words to be added.)

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

    [Name of self-regulatory organization] has prepared statements 
concerning the purpose of, and basis for, the proposed rule change, 
burdens on competition, and comments received from members, 
participants, and others. The text of these statements may be 
examined at the places specified in Item IV below. These statements 
are set forth in Sections A, B, and C below.

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

1. Purpose

    (Provide a statement of the purpose of the proposed rule. The 
statement must:
     Describe the text of the proposed rule change in a 
sufficiently detailed and specific manner as to permit interested 
persons to submit comments;
     Describe the reasons for adopting the proposed rule 
change, any problems the proposed rule change is intended to 
address, the manner in which the proposed rule change will resolve 
those problems, the manner in which the proposed rule change will 
affect various market participants, and any significant problems 
known to the self-regulatory organization that persons affected are 
likely to have in complying with the proposed rule change;
     Describe how the proposed rule change relates to 
existing rules of the self-regulatory organization.)

2. Statutory Basis

    (Provide a statement of the proposed rule change's basis under 
the Act and the rules and regulations under the Act applicable to 
the self-regulatory organization.)

B. Self-Regulatory Organization's Statement on Burden on 
Competition

    (The information required by this section must be sufficiently 
detailed and specific to support the premise that the proposed rule 
change does not unduly burden competition. In responding to this 
section, the self-regulatory organization must:
     State whether the proposed rule change will impose or 
relieve any burden on, or promote, competition;
     Specify the particular categories of persons and kinds 
of businesses that will be burdened and the ways in which the 
proposed rule change will affect them;
     Set forth and respond in detail to written comments 
addressing significant impacts or burdens on competition; and
     Explain why any burden on competition is not undue; or, 
if the self-regulatory organization does not believe that the burden 
on competition is significant, explain why.)

C. Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    (State whether or not comments were solicited or received. 
Summarize all comments received (solicited or unsolicited) and 
respond in detail to any significant issues raised about the 
proposed rule change.
    If an issue is summarized and responded to in detail elsewhere 
in this notice, that response need not be duplicated if an 
appropriate cross-reference is made to the place where the response 
can be found.)

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

    (The self-regulatory organization must include the following 
with the applicable phrase on the proposed rule change's 
effectiveness:)
    The proposed rule change has become effective on [insert date of 
filing of written certification with the CFTC under Section 5c(c) of 
the Commodity Exchange Act; or the date of determination by the CFTC 
that review of the proposed rule change is not necessary; or the 
date of approval of the proposed rule change by the CFTC]; or
    The proposed rule change is not effective because the CFTC [has 
not determined that review of the proposed rule changes is not 
necessary] or [has not approved the proposed rule change].
    Within 60 days of the date of effectiveness of the proposed rule 
change, the Commission, after consultation with the CFTC, may 
summarily abrogate the proposed rule change and require that the 
proposed rule change be refiled in accordance with the provisions of 
Section 19(b)(1) 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 conflicts with the Act. Persons making written 
submissions should file nine copies of the submission with the 
Secretary, Securities and Exhange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609. Comments also may be submitted 
electronically to the following e-mail address: [email protected]. Copies of the submission, all subsequent 
amendments, all written statements with respect to the proposed rule 
change that are filed with the Commission, and all written 
communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld 
from the public in accordance with the provisions of 5 U.S.C. 552, 
will be available for inspection and copying in the Commission's 
Public Reference Room. Copies of these filings also will be 
available for inspection and copying at the principal office of the 
[name of self-regulatory organization]. Electronically submitted 
comments will be posted on the Commission's Internet website (http://www.sec.gov). All submissions should refer to File No. [insert file 
number] and should be submitted by [insert date 21 days from date of 
publication in the Federal Register \4\].

    \4\ To be completed by the Federal Register when the notice is 
submitted for publication.

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[[Page 43752]]

    For the Commission, by the Division of Market Regulation, 
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pursuant to delegated authority.\5\

    \5\ 17 CFR 200.30-3(a)(75).
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[Insert name of Secretary]
Secretary

[FR Doc. 01-20735 Filed 8-17-01; 8:45 am]
BILLING CODE 8010-01-U