[Federal Register Volume 72, Number 60 (Thursday, March 29, 2007)]
[Notices]
[Pages 14841-14842]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-5814]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55518; File No. SR-NASD-2007-024]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change Relating to Portfolio Margin
March 23, 2007.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on March 20, 2007, the National Association of
Securities Dealers, Inc. (``NASD'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change as
described in Items I and II below, which Items have been prepared by
NASD. NASD has filed the proposed rule as a ``non-controversial'' rule
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders it effective upon filing with the
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASD is proposing to correct a typographical error in NASD Rule
2520 (Margin Requirements). In particular, the proposed rule change
would amend NASD Rule 2520 to re-label a subparagraph that was
incorrectly identified as part of a recent rule filing. Below is the
text of the proposed rule change.\5\ Proposed new language is in
italics; proposed deletions are in [brackets].
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\5\ The underlying rule text used in this proposed rule change
is based on NASD Rule 2520, as amended by SR-NASD-2007-013, which
will be implemented on April 2, 2007. See Exchange Act Release No.
55471 (March 14, 2007), 72 FR 13149 (March 20, 2007) (Notice of
filing and immediate effectiveness of File No. SR-NASD-2007-013).
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* * * * *
2520. Margin Requirements
(a) through (f) No Change.
(g) Portfolio Margin.
As an alternative to the ``strategy-based'' margin requirements set
forth in paragraphs (a) through (f) of this Rule, members may elect to
apply the portfolio margin requirements set forth in this paragraph (g)
to all margin equity securities,\1\ listed options, security futures
products (as defined in Section 3(a)(56) of the Exchange Act), unlisted
derivatives, warrants, index warrants and related instruments, provided
that the requirements of paragraph (g)(6)(B)(i) of this Rule are met.
In addition, a member, provided that it is a Futures Commission
Merchant (``FCM'') and is either a clearing member of a futures
clearing organization or has an affiliate that is a clearing member of
a futures clearing organization, is permitted under this paragraph (g)
to combine an eligible participant's related instruments as defined in
paragraph (g)(2)(D), with listed index options, unlisted derivatives,
options on exchange traded funds (``ETF''), index warrants and
underlying instruments and compute a margin requirement for such
combined products on a portfolio margin basis.
The portfolio margin provisions of this Rule shall not apply to
Individual Retirement Accounts (``IRAs'').
(1) through (5) No Change.
(6) Establishing Account and Eligible Positions.l
(A) No Change.
(B) Eligible Products.
(i) For eligible participants as described in paragraphs (g)(4)(A)
through (g)(4)(C), a transaction in, or transfer of, an eligible
product may be effected in the portfolio margin account. Eligible
products under this paragraph (g) consist of:
(a) through (e) No Change.
[(d)](f) a related instrument as defined in paragraph (g)(2)(D).
(7) through (15) No Change.
\1\For purposes of this paragraph (g) of the Rule, the term
``margin equity security'' utilizes the definition at Section 220.2
of Regulation T of the Board of Governors of the Federal Reserve
System.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASD included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. NASD has prepared summaries, set forth in sections A, B,
and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On February 12, 2007, NASD filed with the Commission for immediate
effectiveness a proposed rule change to amend Rule 2520 (Margin
Requirements) to establish a portfolio margin pilot program.\6\ The
Commission published notice of the proposed rule change in the Federal
Register on March 20, 2007.\7\ The proposed rule change, among other
things, added a new paragraph (g)(6)(B)(i) that specifies in separate
subparagraphs a list of the eligible products for the portfolio margin
pilot program. This list of eligible products in paragraph (g)(6)(B)(i)
inadvertently identifies two provisions as subparagraph (d). NASD is
filing this proposed rule change to re-label the last subparagraph (d)
as subparagraph (f).
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\6\ The portfolio margin pilot program is substantially similar
to recent margin rule amendments by the New York Stock Exchange
(``NYSE'') and the Chicago Board Options Exchange (``CBOE''), which
were approved by the Commission. See Exchange Act Release No. 54918
(December 12, 2006), 71 FR 75790 (December 18, 2006) (SR-NYSE-2006-
13, relating to further amendments to the NYSE's portfolio margin
pilot program); Exchange Act Release No. 54125 (July 11, 2006), 71
FR 40766 (July 18, 2006) (SR-NYSE-2005-93, relating to amendments to
the NYSE's portfolio margin pilot program); Exchange Act Release No.
52031 (July 14, 2005) 70 FR 42130 (July 21, 2005) (SR-NYSE-2002-19,
relating to the NYSE's original portfolio margin pilot). See also
Exchange Act Release No. 54919 (December 12, 2006), 71 FR 75781
(December 18, 2006) (SR-CBOE-2006-014, relating to amendments to the
CBOE's portfolio margin pilot); Exchange Act Release No. 52032 (July
14, 2005) 70 FR 42118 (July 21, 2005) (SR-CBOE-2002-03, relating to
the CBOE's original portfolio margin pilot).
\7\ See Exchange Act Release No. 55471 (March 14, 2007), 72 FR
13149 (March 20, 2007) (Notice of filing and immediate effectiveness
of File No. SR-NASD-2007-013).
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NASD has filed the proposed rule change for immediate
effectiveness. As noted above, the proposed rule change is part of a
pilot program that would
[[Page 14842]]
begin on April 2, 2007 and end on July 31, 2007, unless the SEC
approves an extension of the pilot or adoption of the program on a
permanent basis.
2. Statutory Basis
NASD believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\8\ which requires, among
other things, that NASD rules be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. NASD believes that this technical change is consistent
with the protection of investors and the public interest in that it
will avoid any confusion when reading the provisions of Rule
2520(g)(6)(B)(i).
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\8\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NASD does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change is subject to Section
19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(6) thereunder \10\
because the proposal: (i) Does not significantly affect the protection
of investors or the public interest; (ii) does not impose any
significant burden on competition; and (iii) does not become operative
prior to 30 days after the date of filing or such shorter time as the
Commission may designate. At any time within 60 days of the filing of
such proposed rule change, the Commission may summarily abrogate such
rule change if it appears to the Commission that such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act.
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\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 17 CFR 240.19b-4(f)(6).
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NASD has asked the Commission to waive the five-day pre-filing
notice requirement and the 30-day operative delay. The Commission
believes such waivers are consistent with the protection of investors
and the public interest because they would allow the technical
corrections in the proposed rule change to be implemented on April 2,
2007, when the NASD portfolio margin pilot program begins, pursuant to
SR-NASD-2007-013.\11\ For this reason, the Commission designates the
proposal to be operative upon filing with the Commission.\12\
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\11\ For purposes only of waiving the 30-day pre-operative
period, the Commission has considered the proposed rule's impact on
efficiency, competition and capital formation. 15 U.S.C. 78c(f).
\12\ See supra note 7.
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-NASD-2007-024 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASD-2007-024. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room. Copies of such
filing also will be available for inspection and copying at the
principal office of NASD. All comments received will be posted without
change; the Commission does not edit personal identifying information
from submissions. You should submit only information that you wish to
make available publicly. All submissions should refer to File Number
SR-NASD-2007-024 and should be submitted on or before April 19, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-5814 Filed 3-28-07; 8:45 am]
BILLING CODE 8010-01-P