[Federal Register Volume 66, Number 201 (Wednesday, October 17, 2001)]
[Notices]
[Pages 52818-52819]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-26027]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44917; File No. SR-NFA-2001-02]


Self-Regulatory Organizations; National Futures Association; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change by 
National Futures Association Clarifying the Interpretive Notice 
Regarding Obligations to Customers and Other Market Participants

October 10, 2001.
    Pursuant to section 19(b)(7) of the Securities Exchange Act of 1934 
(``Exchange Act''),\1\ and rule 19b-7 under the exchange Act,\2\ notice 
is hereby given that on September 18, 2001, the National Futures 
Association (``NFA'') 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 NFA. The text 
of the proposed rule change is available for inspection and copying at 
the places specified in Item IV below. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 17 CFR 240.19b-7.
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    On August 29, 2001, pursuant to Section 17(j) of the Commodity 
Exchange Act (``CEA''),\3\ NFA requested that the Commodity Futures 
Trading Commission (``CFTC'') make a determination that review of the 
proposed rule change submitted by NFA to the CFTC is not necessary. The 
CFTC made such a determination on September 7, 2001.
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    \3\ 7 U.S.C. 21(j).
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I. Self-Regulatory Organization's Statement of the Terms and 
Substance of the Proposed Rule Change

    The Commodity Futures Modernization Act of 2000 (``CFMA'') amended 
Section 15A of the Exchange Act to add a new subsection (k),\4\ which 
makes NFA a national securities association for the limited purpose of 
regulating the activities of NFA Memberss who are registered as brokers 
or dealers in security futures products under Section 15(b)(11) of the 
Exchange Act.\5\ The proposed rule change clarifies that certain 
provisions of the ``Interpretive Notice Regarding Obligations to 
Customers and Other Market Participants'' (``Interpretive Notice'') 
apply only to these NFA

[[Page 52819]]

Members.\6\ The text of the proposed rule change is available at the 
Office of the Secretary, NFA, and at the Commission.
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    \4\ 15 U.S.C. 78o-3(k).
    \5\ 15 U.S.C. 78o-(b)(11).
    \6\ The instant proposed rule change amends the text of the 
Interpretive Notice that was contained in File No. SR-NFA-2001-01. 
See Securities Exchange Act Release No. 44823 (September 20, 2001), 
66 FR 49439 (September 27, 2001).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    NFA 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
    The Interpretive Notice contains provisions: (1) Prohibiting 
trading ahead of research reports; (2) prohibiting trading based on 
knowledge of an imminent block transaction, with an exception for 
hedging counterparty risk under approved exchange block rules; and (3) 
requiring a sound basis for evaluating the facts regarding a particular 
security futures product. The proposed rule change clarifies that these 
requirements only apply to NFA Members who are registered as brokers or 
dealers in security futures products under Section 15(b)(11) of the 
Exchange Act.\7\
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    \7\ 15 U.S.C. 78o(b)(11).
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2. Statutory Basis
    The rule change is authorized by, and consistent with, Section 
15A(k) of he Exchange Act.\8\
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    \8\ 15 U.S.C. 78o-3(k).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change will not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Exchange Act and the CEA, as they were amended by the CFMA. In 
fact, the NFA believes that the proposed rule change will level the 
playing field between broker-dealers that are dual members of NFA and 
the National Association of Securities Dealers (``NASD'') and broker-
dealers that are only members of NFA by assuring that dual members are 
not subject to duplicative regulation.

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

    NFA worked with industry representatives in developing the rule 
change. NFA did not, however, publish the rule change to its membership 
for comment. NFA did not receive comment letters concerning the rule 
change.

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

    The proposed rule change has become effective on September 7, 2001.
    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 Exchange Act.\9\
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    \9\ 15 U.S.C. 78s(b)(1).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change conflicts with the Exchange Act. Persons making written 
submissions should file nine copies of the submission with the 
Secretary, Securities and Exchange 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 NFA. 
Electronically submitted comments will be posted on the Commission's 
Internet website (http://www.sec.gov). All submissions should refer to 
File No. SR-NFA-2001-02 and should be submitted by November 7, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(75).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-26027 Filed 10-16-01; 8:45 am]
BILLING CODE 8010-01-M