Rule 19b-7 Text

Thursday,
March 1, 2007

Part II

Securities and
Exchange
Commission

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17 CFR Parts 240 and 249
Proposed Rule Changes of Self-Regulatory
Organizations; Proposed Rule

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Federal Register / Vol. 72, No. 40 / Thursday, March 1, 2007 / Proposed Rules

SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 240 and 249
[Release No. 34–55341; File No. S7–06–07]
RIN 3235–AJ80

Proposed Rule Changes of SelfRegulatory Organizations

SUMMARY: The Securities and Exchange
Commission (‘‘Commission’’) is
proposing to require Self-Regulatory
Organizations (‘‘SROs’’) that submit
proposed rule changes pursuant to
Section 19(b)(7)(A) of the Securities
Exchange Act of 1934 (‘‘Act’’) to file
these rule changes electronically. In
addition, the Commission is proposing
to require SROs to post all such
proposed rule changes on their Web
sites. Together, the proposed
amendments are designed to expand the
electronic filing by SROs of proposed
rule changes, making it more efficient
and cost effective, and to harmonize the
process of filings made under Section
19(b)(7)(A) with that already in place for
filings made by SROs under Section
19(b)(1) of the Act.
DATES: Comments should be submitted
on or before April 30, 2007.
ADDRESSES: Comments may be
submitted by any of the following
methods:

Electronic Comments
• Use the Commission’s Internet
comment form (http://www.sec.gov/
rules/proposed.shtml); or
• Send an e-mail to [email protected]. Please include File
Number S7–06–07 on the subject line;
or
• Use the Federal eRulemaking Portal
(http://www.regulations.gov). Follow the
instructions for submitting comments.

sroberts on PROD1PC70 with PROPOSALS

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 S7–06–07. This file number
should be included on the subject line
if e-mail is used. To help us 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/
proposed.shtml). Comments are also

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John
Roeser, Assistant Director, at (202) 551–
5630, Timothy Fox, Special Counsel, at
(202) 551–5543, Michou Nguyen,
Special Counsel, at (202) 551–5634,
Sherry Moore, Paralegal, at (202) 551–
5549, Division of Market Regulation,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–6628.

FOR FURTHER INFORMATION CONTACT:

Securities and Exchange
Commission.
ACTION: Proposed rule.
AGENCY:

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available for public inspection and
copying in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549. All comments
received will be posted without change;
we do not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly.

SUPPLEMENTARY INFORMATION:

I. Background
Under Section 19(b)(7) of the Act and
Rule 19b–7 thereunder, securities
futures exchanges registered with the
Commission under Section 6(g) of the
Act and associations registered with the
Commission for the limited purpose of
regulating activities of members who are
registered as broker-dealers in security
futures 1 with respect to securities
futures products under Section 15A(k)
of the Act are required to file certain
categories of proposed rule changes
with the Commission.2 These proposed
rule changes are published for comment
and may take effect: (1) When a written
certification has been filed with the
Commodity Futures Trading
Commission (‘‘CFTC’’) under Section
5c(c) of the Commodity Exchange Act;
(2) when the CFTC determines that
review of the proposed rule change is
not necessary; or (3) when the CFTC
approves the proposed rule change.3
Rule 19b–7 and Form 19b–7 under the
Act set forth the process for SROs to file
proposed rule changes under Section
19(b)(7).
Currently, other SROs are required to
electronically file proposed rule changes
submitted to the Commission under
1 See Section 15(b)(11) of the Act, 15 U.S.C.
78o(b)(11).
2 Section 19(b)(7) of the Act. 15 U.S.C. 78s(b)(7).
Specifically, under Section 19(b)(7), these SROs
submit those 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 the SRO’s obligation to enforce
the securities laws. Id.
3 Section 19(b)(7)(B) of the Act. 15 U.S.C.
78s(b)(7)(B). Proposed rule changes that relate to
margin, except for those that result in higher margin
levels, must be filed pursuant to Sections 19(b)(1)
of the Act. 15 U.S.C. 78s(b)(1).

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Section 19(b)(1) of the Act.4 SROs are
also required to post such proposed rule
changes on their Web sites.5
Proposed rule changes submitted by
SROs under Section 19(b)(7) of the Act,
in contrast, are submitted to the
Commission in paper.6 In addition,
SROs are not currently required to post
proposed rule changes filed under
Section 19(b)(7) on their Web sites. The
Commission is now proposing to amend
Rule 19b–7 and Form 19b–7 to require
electronic filing and Web posting of
proposed rule changes filed under
Section 19(b)(7) of the Act. These
proposed requirements are consistent
with the requirements already in place
for proposed rule changes filed pursuant
to Rule 19b–4 and Form 19b–4.
II. Proposed Amendments
A. Electronic Filing
The Commission is proposing to
amend Rule 19b–7 and Form 19b–7 to
require that all Forms 19b–7, and any
amendments thereto, be submitted
electronically to the Commission. The
proposal would modernize this rule
filing process by expanding the types of
proposed rule changes filed
electronically with the Commission.
Each SRO would have access to a secure
Web site, known as the Electronic Form
Filing System (‘‘EFFS’’), which would
enable authorized individuals at the
SRO to file with the Commission an
electronic Form 19b–7 on the SRO’s
behalf.7 The current requirement in
Form 19b–7 that SROs submit multiple,
paper copies of proposed rule changes
would be eliminated.8 Under the
proposed amendments, a proposed rule
change would be deemed filed with the
Commission on the business day that it
is submitted electronically, so long as
the Commission receives it on or before
4 17 CFR 240.19b–4. See Securities Exchange Act
Release No. 50486 (October 4, 2004), 69 FR 60287
(October 8, 2004) (File No. S7–18–04) (‘‘Electronic
19b–4 Adopting Release’’).
5 17 CFR 240.19b–4(m).
6 See Securities Exchange Act Release No. 44692
(August 13, 2001), 66 FR 43721 (August 20, 2001),
(19b–7 Adopting Release).
7 The SRO would determine which individuals
would be supplied with User IDs and passwords to
access the secure Web site. See infra note 11 and
accompanying text.
8 Occasionally, an SRO may find it necessary to
file documents that cannot be submitted
electronically, such as comment letters submitted to
the Exchange before filing, or other exhibits. In
addition, it may not be appropriate to require
proprietary and other information subject to a
request for confidential treatment to be filed
electronically. Accordingly, the proposed
amendments to Rule 19b–7 and Form 19b–7 would
retain the flexibility to permit portions of a rule
filing to be made in paper form under limited
circumstances. For example, the Commission
would permit SROs to file materials for which
confidential treatment is requested in paper format.

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5:30 p.m., Eastern Standard Time or
Eastern Daylight Savings Time,
whichever is currently in effect, and it
is filed in accordance with the
requirements of Rule 19b–7 and Form
19b–7.
The Commission also proposes to
amend Form 19b–7 so that SROs would
be required to file their proposed rule
changes with an electronic signature.9
Form 19b–7 currently requires a person
who is ‘‘duly authorized’’ by an SRO to
sign manually all rule filings.10 Under
the proposal, each duly authorized
signatory would be required to obtain a
‘‘digital ID,’’ which would provide both
the Commission and the SRO with
assurances of the authenticity and
integrity of the electronically-submitted
Form 19b–7.11 In addition, each
signatory would be required to
manually sign the Form 19b–7,
authenticating, acknowledging, or
otherwise adopting his or her electronic
signature that is attached to or logically
associated with the filing. In accordance
with Rule 17a–1 under the Act,12 the
SRO would be required to retain that
manual signature page of the rule filing,
authenticating the signatory’s electronic
signature, for not less than five years
after the Form 19b–7 is filed with the
Commission and, upon request, furnish
a copy of it to the Commission or its
staff.13
9 The Commission notes that the Electronic
Signatures in Global and National Commerce Act,
15 U.S.C. 7001, et seq. does not apply in this regard.
10 The signature requirement of Form 19b–7
currently states that ‘‘pursuant to the requirements
of the [Act], the [SRO] has duly caused the filing
to be signed on its behalf by the undersigned
thereunto duly authorized.’’ See 17 CFR 249.822.
The Commission proposes to clarify on Form 19b–
7 that this individual must be an officer of the SRO,
who has been authorized by the SRO’s governing
body to sign proposed rule changes on behalf of the
SRO. The General Instructions to Form 19b–7
currently provide that 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.’’ Therefore, the proposed clarification would not
impose a new obligation for SRO officers.
11 A digital ID, sometimes called a ‘‘digital
certificate,’’ is a file on the computer that identifies
the user. Computers can use a digital ID to create
a digital signature that verifies both that the
message originated from a specific person and that
the message has not been altered either
intentionally or accidentally. The user obtains a
digital ID from a ‘‘Certificate Authority’’ (‘‘CA’’) for
a modest sum (currently approximately $20 per
year). When the SRO electronically sends the Form
19b–7 to the Commission, the digital ID will
encrypt the data through a system that uses ‘‘key
pairs.’’ With key pairs, the SRO’s software
application uses one key to encrypt the document.
When the Commission receives the SRO’s
electronic document, the Commission’s software
will use a matching key to decrypt the document.
12 17 CFR 240.17a–1.
13 See Proposed Rule 19b–7(d). These
requirements are substantially consistent with the
requirements for Form 19b–4 filings, which were

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Based on the Commission’s
experience receiving electronic Rule
19b–4 filings from SROs for nearly two
years, the Commission believes that
requiring SROs to file proposed rule
changes on Form 19b–7 electronically
would have many benefits. First, the
Commission believes electronic filing
would reduce the amount of time
required by SROs to submit SRO rule
filings by eliminating paper delivery,
photocopying, and distribution. Under
the current system, SROs send paper
copies of proposed rule changes filed
under Rule 19b–7 to the Commission
via messenger, overnight delivery, or
U.S. mail. Electronic filing would
reduce costs for the SROs 14 because the
SROs would no longer incur costs for
delivery of paper filings or for the SRO
staff time currently devoted to preparing
filing packages. The Commission also
would benefit from reducing the
personnel time currently associated
with manually processing paper filings.
Second, electronic filing would allow
for a more efficient use of Commission
resources by integrating the SRO
electronic filing technology with SRO
Rule Tracking System (‘‘SRTS’’), the
internal Commission database that
tracks these filings, the proposal would
enable Commission staff to more easily
monitor and process proposed rule
changes. Pertinent information
regarding proposed rule changes, as
well as amendments, would be captured
automatically by SRTS. As a result,
Commission staff would be able to
monitor electronically the progress of
proposed rule changes filed on Form
19b–7 from initial receipt through final
disposition and thereby enhance its
management of the rule filing process.
B. Posting of Rule 19b–7 Proposed Rule
Changes on SRO Web Sites
The Commission also is proposing to
amend Rule 19b–7 to require each SRO
to post proposed rule changes filed
pursuant to that Rule, and any
amendments thereto, on its public Web
site no later than two business days after
filing with the Commission.15 This
requirement would provide interested
persons with quick access to the
proposed rule change, while at the same
time providing SROs with sufficient
time to comply with this posting
requirement. The complete proposed
rule change would be available in the
adapted from Section 232.302 of Regulation S–T, 17
CFR 232.302 for EDGAR filers.
14 See infra notes 42–44 and accompanying text.
15 Rule 19b–4 requires SROs to post proposed rule
changes filed under Section 19(b)(1), and any
amendments thereto, on their Web site within two
business days after the filing of the proposed rule
change. 17 CFR 240.19b–4(l).

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Commission’s Public Reference Room in
electronic format. The Commission
believes that Web site accessibility of
SRO proposed rule changes filed under
Section 19(b)(7) of the Act would (1)
provide interested persons with faster
access to proposed rule changes; (2)
facilitate the ability of interested
persons to comment on the proposals;
and (3) save SRO resources currently
used to monitor the Commission’s
Public Reference Room for competitors’
proposed rule changes.
The Commission is also proposing to
require an SRO to remove a proposed
rule change from its Web site within
two business days of Commission
notification to the SRO that such
proposed rule change was not properly
filed,16 or of the SRO’s withdrawal of
such proposed rule change.
C. Requirement To Update Rule Text on
SRO Web Sites
Currently, Rule 19b–4(m) under the
Act 17 requires all SROs to post and
maintain on their Web sites a complete
and accurate copy of their rules. This
requirement currently applies to SROs
that file proposed rule changes under
Section 19(b)(7) of the Act. The
Commission is not proposing to change
this requirement. All SROs would
continue to be required to post and
maintain a complete and accurate copy
of their rules. The Commission is
proposing to add paragraph (g) to Rule
19b–7 to clarify that an SRO would be
required (1) to post and maintain a
current and complete version of its rules
on its Web site and (2) to update the
rules posted on its Web site within two
days after a rule change becomes
effective. The Commission believes that
this proposal clarifies when an SRO
must update the rules posted on its Web
site to reflect proposed rule changes
filed under Rule 19b–7.
D. Form 19b–7 Amendments
1. Form 19b–7 Amendments
The Instructions to Form 19b–7
would be amended to eliminate the
required submission of nine paper
copies and instead require electronic
filing of Form 19b–7.18 To access the
secure Internet site for Web-based filing
of the Form 19b–7, the SRO would
submit to the Commission an External
Application User Authentication Form
16 A screen within EFFS, the Web-based
electronic rule filing system, would indicate that a
rule filing has not been properly filed and has been
returned to the SRO.
17 17 CFR 240.19b–4(m).
18 The proposed amendments to Form 19b–7 are
attached as Appendix A.

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(‘‘EAUF’’)19 to register each individual
at the SRO who will be submitting
Forms 19b–7 on behalf of the SRO.
Upon receipt and verification of the
information in the EAUF process, the
Commission would issue each such
person a User ID and Password to
permit access to the Commission’s
secure Web site. As Form 19b–7 would
be electronic, initially the authorized
user at an SRO would access a screen
containing a filing template, referenced
as Page 1, in which it could identify the
SRO, enter a brief description of the
proposed rule change, and enter a brief
description of the SRO governing body
action approval.20 The SRO would
provide contact information and place
the electronic signature of a duly
authorized officer on this Page 1 initial
screen.21 Only a duly authorized officer
of the SRO would be authorized to affix
his or her digital signature to the Form
19b–7. The second screen of the
electronic Form 19b–7 would provide
the SRO with a means to attach the
proposed rule change and related
exhibits in Microsoft Word format.22
EAUF users would have electronic
access to the general instructions for
using the Form, as adapted for
electronic filing.23 Finally, the SRO
would use the electronic Form 19b–7 to
amend or withdraw a rule filing
pending with the Commission.
The Commission is also proposing a
number of changes to Form 19b–7,
unrelated to electronic filing, that are
modeled after certain provisions in
Form 19b–4, which the Commission
preliminarily believes would facilitate
an SRO’s proper filing of Form 19b–7.
For example, the format of the
Instructions to Form 19b–7 would be
organized according to the sections used
for Form 19b–4 Instructions, instead of
19 This Commission Web-based application
currently exists and allows authorized external
users to access select Commission systems.
20 The authorized user also would be able to
indicate if there would be a separate filing of any
hard copy exhibits that are unable to be submitted
electronically.
21 As noted supra notes 9–11, and accompanying
text, a person who is a ‘‘duly authorized officer’’ at
the SRO would be required to place his or her
‘‘electronic signature’’ on the Form 19b–7 before it
is transmitted electronically to the Commission.
22 Exhibits 2, 3, and 5 may not be available in
Microsoft Word and could be submitted in another
acceptable electronic format, including Microsoft
Excel, Microsoft PowerPoint, Adobe Acrobat, or
Corel WordPerfect.
23 For example, the SRO would click separate
boxes on the second screen to attach documents
containing the various exhibits; notices, written
comments, transcripts, other communications;
form, report, or questionnaire; proposed rule text;
CFTC certification; the completed notice of the
proposed rule change for publication in the Federal
Register; and, marked copies of amendments if
applicable.

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the combination of questions and titles
that serve as subject heads in the
Instructions to Form 19b–7 currently.
The proposed Form 19b–7 would
require the SRO to describe the purpose
of the proposed rule change in sufficient
detail to enable the public to provide
meaningful public comment. The Form
19b–7 would direct the SRO to relevant
sections of the Act that are appropriate
for discussion in the Statutory Basis
section of the Form 19b–7 and would
clarify that a mere assertion that the
proposed rule change is consistent with
the Act is not sufficient to describe why
the proposed rule change is consistent
with the Act. The proposed Form 19b–
7 would also provide updated
instructions related to the solicitation of
comments from interested persons
regarding the proposed rule change.
These updated instructions would
include the new address where
commenters may direct comments to
Form 19b–7 filings in hard copy and
describe the manner in which
comments may submitted on the SEC
Web site.
The proposed changes to Form 19b–
7 would alter the way that the Exhibits
are organized and the Instructions to
such Exhibits are presented. For
example, the proposed Instructions
would direct an SRO to include the
completed notice of the proposed rule
change (‘‘Form 19b–7 Notice’’ or
‘‘Notice’’) as Exhibit 1, whereas such
notice is not assigned to an Exhibit in
the existing Form 19b–7. The
instructions for the Form 19b–7 Notice
would be amended to include more
detailed guidance on the current
requirement that the Notice must be
formatted to comply with the
requirements for Federal Register
publication. For example, the proposed
Instructions would provide guidance
regarding Federal Register requirements
relating to margin spacing, page
numbering, and line spacing.
The subject of existing Exhibit 1,
relating to communications with third
parties on the subject of the proposed
rule change, would move to Exhibit 2.
The guidance in the existing
Instructions to Exhibit 2 would be
replaced, in Exhibit 3, with more
detailed guidance as to how the SRO
should present forms, reports, and
questionnaires that the SRO proposes to
use to implement the terms of the
proposed rule change. The requirement
to include the text of the proposed rule
change would remain in Exhibit 4, but
the requirement for the SRO to describe
the anticipated effect of the proposed
rule change would have on the
application of other rules of the SRO
would move to Section II(A)(1)(b) of the

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Form 19b–7 Notice. The requirements
relating to Exhibit 5, regarding the
effectiveness of the proposed rule
change, would remain the same.
The Instructions to Form 19b–7
currently describe circumstances under
which an SRO must file an amendment
to a proposed rule change and the
procedures an SRO must follow when
submitting an amendment. The
proposed changes to the Instructions to
Form 19b–7 would describe the
procedures an SRO would follow to
submit an amendment electronically.
In addition, the Commission notes
that Form 19b–7 will continue to
require an SRO to: (1) Describe the text
of the proposed rule change in a
sufficiently detailed and specific
manner as to permit interested persons
to submit comments; (2) describe the
reasons for adopting the proposed rule
change, how the proposal will address
any problems described in the proposed
rule change, and the manner in which
the proposed rule change will affect
various market participants; (3) describe
how the filing relates to existing rules of
the SRO;24 and (4) provide an accurate
statement of the authority and statutory
basis for, and purpose of, the proposed
rule change, as well as its impact on
competition, if any, and a summary of
any written comments received by the
SRO.
As noted above, the Commission
recognizes that in rare circumstances
SROs may be unable to file certain
documents electronically with the
Commission. Therefore, under these
limited circumstances, the Commission
would allow SROs to file documents in
paper format within five days of the
electronic filing of all other required
documents.25
2. Accurate, Consistent, and Complete
Forms 19b–7
The Commission firmly believes that,
to provide the public with a meaningful
opportunity to comment, a proposed
rule change must be accurate,
consistent, and complete. Form 19b–7
states that the form, including the
exhibits, is intended to elicit
information necessary for the public to
provide meaningful comment on the
proposed rule change and for the
Commission to determine whether
abrogation of the proposal is appropriate
because it unduly burdens competition
or efficiency, conflicts with the
24 17

CFR 249.822.
exception from electronic filing would not
apply to Page 1 to Form 19b–7 or Exhibits 1 and
4 thereto but would only be applicable to Exhibits
2 and 3, and any documents filed pursuant to a
request for confidential treatment pursuant to the
Freedom of Information Act, 5 U.S.C. 552.
25 This

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securities laws, or is inconsistent with
the public interest and protection of
investors.26 The SRO must provide all
the information called for by the form,
including the exhibits, and must present
the information in a clear and
comprehensible manner.
Currently, Commission staff devotes
significant time to processing proposed
rule changes, reviewing them for
accuracy and completeness, and
preparing them for publication. SRO
staff should ensure that the filings: (1)
Contain a properly completed Form
19b–7; (2) contain a clear and accurate
statement of the authority for, and basis
and purpose of, such rule change,
including the impact on competition; (3)
contain a summary of any written
comments received by the SRO; (4)
contain the proper certification
submitted to the CFTC, any other
appropriate determination made by the
CFTC that a review of the proposed rule
change is not necessary, or an indication
that the CFTC has approved the
proposed rule change; and (5) describe
the impact of the proposed rule change
on the existing rules of the SRO,
including any other rules proposed to be
amended. As described in the current
Form 19b–7, filings that do not comply
with the foregoing are deemed not filed
and returned to the SRO. In the future,
electronically filed proposed rule
changes that do not comply with the
foregoing would continue to be returned
to the SRO, but in electronic format,
and, consistent with current practice,
would be deemed not filed with the
Commission until all required
information has been provided.
E. Rule 19b–4 and Form 19b–4
Conforming Changes

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The Commission also is proposing to
make certain conforming changes to
Rule 19b–4 to account for the proposed
amendments to Rule 19b–7. In
particular, the Commission proposes to
remove a reference in paragraph (m) of
Rule 19b–4 relating to the requirement
that SROs update their Web sites to
reflect proposed rule changes filed
pursuant to Section 19(b)(7) of the Act.
This requirement is proposed to be
incorporated into new paragraph (g) of
Rule 19b–7. The Commission is also
proposing to make other changes to
paragraph (m) of Rule 19b–4 to clarify
26 Section 19(b)(7)(C) of the Act 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 Act if it appears to the
Commission that such a rule change unduly
burdens competition or efficiency, conflicts with
the securities laws, or is inconsistent with the
public interest and the protection of investors.

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that the obligation for SROs to update
their Web sites to reflect proposed rule
changes under this provision applies
only to proposed rule changes filed
under Section 19(b)(1) of the Act.
The Commission further proposes to
clarify on Form 19b–4 that an
individual who signs the Form 19b–4
digitally must be an officer authorized
by the SRO’s governing body to sign
proposed rule changes on behalf of the
SRO. Accordingly, the Commission
proposes to amend Page 1 of Form 19b–
4 to add the word ‘‘officer’’ to follow the
phrase ‘‘duly authorized’’ in the
signature box appearing on that page.27
The Commission notes that this change
does not create any new obligation.
Section F of the Instructions to Form
19b–4 provides that a ‘‘duly authorized
officer’’ sign Form 19b–4 submissions,
but the word ‘‘officer’’ was
inadvertently omitted from the signature
box when the electronic Form 19b–4
was adopted.28
III. Request for Comment
The Commission requests the views of
commenters on all aspects of the
proposed amendments, discussed
above, to Rule 19b–7 and Form 19b–7,
and to Rule 19b–4 and Form 19b–4
under the Act:
• In particular, the Commission
requests comment on whether there is a
need for an exception to the electronic
filing requirement of Exhibit 5 to Form
19b–7 (Date of Effectiveness of Proposed
Rule Change). If so, what specific
situations should be excepted, and what
accommodations should be made?
• Would the proposed amendment
create additional costs or other burdens
for SROs that submit Form 19b–7s?
IV. Paperwork Reduction Act
Certain provisions of the proposed
rule and form contain ‘‘collection of
information requirements’’ within the
meaning of the Paperwork Reduction
Act of 1995.29 The Commission has
submitted the information to the Office
of Management and Budget (‘‘OMB’’) for
review in accordance with 44 U.S.C.
3507 and 5 CFR 1320.11. The
Commission has submitted revisions to
the current collection of information
titled ‘‘Rule 19b–7 Under the Securities
Exchange Act of 1934’’ (OMB Control
No. 3235–0553). The Commission has
also submitted revisions to the current
collection of information titled ‘‘Form
19b–7 Under the Securities Exchange
Act of 1934’’ (OMB Control No. 3235–
27 The proposed amendment to Form 19b–4 is
attached as Appendix B.
28 See Electronic 19b–4 Adopting Release, supra
note 4.
29 44 U.S.C. 3501 et seq.

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9415

0553). In addition, the Commission has
submitted revisions to the current
collection of information titled ‘‘Rule
19b–4 Under the Securities Exchange
Act of 1934’’ (OMB Control No. 3235–
0045). Finally, the Commission has
submitted revisions to the current
collection of information titled ‘‘Form
19b–4 Under the Securities Exchange
Act of 1934’’ (OMB Control No. 3235–
0045). 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.
A. Summary of Collection of
Information
Rule 19b–7 currently requires an SRO
that proposes to add, delete, or amend
its rules relating to certain subjects 30 to
submit such proposed rule change to the
Commission on Form 19b–7. Form 19b–
7 currently 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; (4) to provide a
summary of any written comments on
the proposed rule change received by
the SRO; and (5) to describe the date
upon which the proposed rule change
becomes effective and provide
supporting documentation relevant to
the effectiveness date. The proposed
amendments would add a technical
requirement to Form 19b–7 that an SRO
provide on Page 1 of Form 19b–7 more
information about a staff member
prepared to answer questions about the
filing, such as the SRO staff member’s
title, email address and fax number. The
proposed amendments would require
Web site posting of all proposed rule
changes, and any amendments thereto.
In addition, the proposed amendments
would codify in Rule 19b–7 the current
requirement in Rule 19b–4(m) that SROs
(1) post a current and complete set of
their rules on their Web sites and (2)
update their Web sites within two
business days after a rule change
becomes effective to reflect such rule
changes filed pursuant to Section
19(b)(7) of the Act. The proposed
amendment would also clarify that a
mere assertion that the proposed rule
change is consistent with the Act is not
sufficient to describe why the proposed
rule change is consistent with the Act.
Rule 19b–4(m) would continue to
require SROs to update their rules on
their Web sites to reflect proposed rule
changes filed pursuant to Section
19(b)(1) of the Act. All SROs that file
Form 19b–4 and Form 19b–7 currently
30 See

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post this information on their Web sites.
Therefore, SROs would not be required
to provide additional information to
comply with proposed Rule 19b–7(g)
and current Rule 19b–4(m).
B. Proposed Use of Information
The information provided via EAUF,
as required by the proposed
amendments to Form 19b–7, would be
used by the Commission to verify the
identity of the SRO individual and
provide such individual access to a
secure Commission Web site for filing of
the Form 19b–7. The Commission
proposes to require that SROs post their
proposed rule changes filed pursuant to
Section 19(b)(7) of the Act on their Web
sites, so that these proposals could be
viewed by the general public, SRO
members, competing SROs, other
market participants, and Commission
staff. The information would enable
interested parties to more easily access
SRO rules and rule filings, which would
facilitate public comment on proposed
SRO rules. Additionally, SRO staff,
members, industry participants, and
Commission staff would utilize the
accurate and current version of SRO
rules that are posted on the SRO Web
site to facilitate compliance with such
rules.
C. Respondents

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There are currently five SROs 31
registered with the Commission as
national securities exchanges under
Section 6(g) of the Act or as a national
securities association registered with the
Commission under Section 15A(k) of
the Act subject to the collection of
information for Rule 19b–7, though that
number may vary owing to the
consolidation of SROs or the
introduction of new entities. In a fiscal
year, these respondents filed an average
of 12 rule change proposals and 3
amendments to those proposed rule
change proposals, for an average of 15
filings per fiscal year that are subject to
the current collection of information.32
Of the 12 proposed rule changes filed by
SROs, all 12 ultimately became effective
because the SROs did not withdraw any
proposed rule changes.
31 The Board of Trade of the City of Chicago, Inc.
(‘‘CBOT’’), Chicago Mercantile Exchange, Inc.
(‘‘CME’’), CBOE Futures Exchange LLC (‘‘CFE’’),
National Futures Association (‘‘NFA’’), and
OneChicago LLC (‘‘OC’’).
32 Since the implementation of the CFMA in 2001
to September 30, 2006, SROs have filed 62
proposed rule changes pursuant to Section 19(b)(7)
of the Act and 13 amendments.

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D. Total Annual Reporting and
Recordkeeping Burden
1. Background
The proposed amendments to Rule
19b–7 and Form 19b–7 are designed to
modernize the SRO rule filing process
and to make the process more efficient
by conserving both SRO and
Commission resources. Rule 19b–7 and
Form 19b–7 would be amended to
require SROs to electronically file their
proposed rule changes. Form 19b–7
would be revised to accommodate
electronic submission. In addition,
SROs would be required to post on their
Web sites proposed rule changes
submitted on Form 19b–7 to the
Commission and amendments thereto.
A conforming amendment would codify
in Rule 19b–7 the current requirement
in Rule 19b–4(m) for SROs to maintain
a current and complete set of their rules
on their Web site.
2. Rule 19b–7 and Form 19b–7
The Commission does not expect that
the amendments to Rule 19b–7 and
Form 19b–7 relating to electronic filing
of proposed rule changes and
amendments would impose any
material upfront cost on SROs. The
technology for electronic filing would
be Web-based; therefore, the SROs
should not have any material upfront
technology expenditures for electronic
filing because all SROs currently have
access to the Internet.
However, each SRO would be
required to obtain a digital ID from a
certificating authority. The Commission
staff estimates the annual cost of the ID
to be $20 for each SRO.33 The
Commission staff estimates that each
SRO would purchase five such digital
IDs for its staff. Thus, the annual cost of
the ID for all SROs would be $500 (5
SROs × $20 × 5).
In addition, the Commission believes
that SROs could incur some costs
associated with training their personnel
about the procedures for submitting
proposed rule changes electronically via
EFFS. However, the Commission
believes that such costs will be one-time
costs and relatively insubstantial since
the SROs are already familiar with the
information required in filing a
proposed rule change with the
Commission and would only be
required to submit the same information
electronically under this proposal.
Based on the experience of the
Commission staff in training SROs for
the implementation of electronic Rule
33 This estimate is based upon the price displayed
for the ID on VeriSign’s Web site as of December
21, 2006.

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19b–4 filings, the Commission estimates
that each SRO would spend
approximately two hours training each
staff member who would use the EFFS
to submit the proposed rule changes
electronically. Accordingly, the
Commission estimates that the upfront
cost of training SRO staff members to
use EFFS will be 50 hours (5 SROs × 2
hours × 5 staff members).
An SRO rule change proposal is
generally filed with the Commission
after an SRO’s staff has obtained
approval by its Board. The time required
to complete a filing varies significantly
and is difficult to separate from the time
an SRO spends in developing internally
the proposed rule change. However, the
Commission estimates that 15.5 hours is
the amount of time required to complete
an average rule filing using present
Form 19b–7.34 This figure includes an
estimated 11.5 hours of in-house legal
work and four hours of clerical work.
The amount of time required to prepare
amendments varies because some
amendments are comprehensive, while
other amendments are submitted in the
form of a one-page letter. The
Commission staff estimates that, under
current rules, seven hours is the amount
of time required to prepare an
amendment to the rule proposal. This
figure includes an estimated two hours
of in-house legal work and five hours of
clerical work.
Based upon the experience of
electronic filing of proposed rule
changes on Form 19b–4, the
Commission expects that an electronic
Form 19b–7 and new requirements to
Form 19b–7 would reduce by three
hours the amount of SRO clerical time
required to prepare the average
proposed rule change and by four hours
for an amendment thereto. The
Commission does not believe that the
new instruction specifying that an SRO
describe the purpose of the proposed
rule change in sufficient detail to enable
the Commission to determine whether
abrogation is appropriate will add any
additional burden to the Form 19b–7
filing process because the existing
Instructions to Form 19b–7 provide an
obligation that all information in the
Form must be presented in a manner
which will enable the Commission to
make such a determination. The
Commission does not believe that the
additional contact information of an
SRO staff member on Page 1 of the Form
will add any measurable burden to an
SRO submitting a Form 19b–7, because
the information is so readily accessible
to the party submitting the filing. With
the proposed electronic filing, the
34 See

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Commission staff estimates that 12.5
hours is the amount of time that would
be required to complete an average rule
filing and that three hours is the amount
of time required to complete an average
amendment. These figures reflect the
three hours in savings in clerical hours
that would result from the use of an
electronic form for rule filings and four
hours for amendments.35 The
Commission staff estimates that the
reporting burden for filing rule change
proposals and amendments with the
Commission under the proposed
amendments would be 159 hours (12
rule change proposals × 12.5 hours + 3
amendments × 3 hours).
3. Posting of Proposed Rule Changes
Filed Under Rule 19b–7 on SRO Web
Sites
The proposed amendments would
also require SROs to post proposed rule
changes filed under Rule 19b–7, and
any amendments thereto, on their Web
sites. The Commission staff estimates
that 30 minutes is the amount of time
that would be required to post a
proposed rule on an SRO’s Web site and
that 30 minutes is the amount of time
that would be required to post an
amendment on an SRO’s Web site.36
The Commission staff estimates that the
reporting burden for posting rule change
proposals and amendments on the SRO
Web sites would be eight hours (12 rule
change proposals × 0.5 hours + 3
amendments × 0.5 hours).

sroberts on PROD1PC70 with PROPOSALS

4. SRO Rule Text
Currently, all SROs are required to
post their current rules on their Web
sites pursuant to Rule 19b–4(m). The
Commission estimates, based upon its
analysis in the Electronic 19b–4
Adopting Release, that the amount of
time required to update an SRO’s rule
text on its Web site after a proposed rule
change becomes effective to be four
hours. Proposed rule changes submitted
under Section 19(b)(7)(A) become
effective an average of 12 times a year.
Therefore, the Commission staff
estimates that the reporting burden for
updating the posted SRO rules on the
SRO Web site will be 48 hours (12
proposed rule changes submitted
pursuant to Section 19(b)(7)(A) × 4
hours).
The proposal would move the burden
associated with complying with this
35 The SROs’ four hour time savings would result
from the elimination of tasks, such as making
multiple copies of the Form 19b–7 and
amendments, arranging for couriers, and making
follow-up telephone calls to ensure Commission
receipt.
36 This estimate is based on information from the
Commission’s Office of Information Technology.

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provision from Rule 19b–4(m) to Rule
19b–7(g). Based upon the Commission’s
reporting burden estimate described
above, the Commission estimates that
the proposal will reduce the burden
associated with SROs’ compliance with
the requirement provided in Rule 19b–
4 that SROs post current and complete
rule text on their Web sites and update
that rule text after it changes following
the effectiveness of a proposed rule
change by 48 hours annually and
increase the corresponding burden for
compliance with Rule 19b–7 by 48
hours.
5. Total Annual Reporting Burden
Thus, the Commission staff estimates
that the total annual reporting burden
under the proposed rule would be 167
hours (159 hours for filing proposed
rule changes and amendments + 8 hours
for posting proposed rule changes and
amendments on the SROs’ Web sites +
48 hours for posting and updating
complete sets of SRO rule text pursuant
to Rule 19b–7 ¥ 48 hours for posting
and updating complete sets of SRO rule
text pursuant to Rule 19b–4).
In addition to the 155 hour annual
burden, the Commission believes that
SROs could incur some costs associated
with training their personnel about the
procedures for submitting proposed rule
changes electronically and submission
of the information via EFFS. However,
the Commission believes that such costs
would be one-time costs and relatively
insubstantial since the SROs are already
familiar with the information required
in filing a proposed rule change with
the Commission and would only be
required to submit the same information
electronically under this proposal. The
Commission estimates that each SRO
would spend approximately two hours
training each staff member who will use
the EFFS to submit the proposed rule
changes electronically. Accordingly, the
Commission estimates that the upfront
cost of training SRO staff members to
use EFFS would be 50 hours (5 SROs ×
2 hours × 5 staff members).
The Commission does not expect that
the proposed amendments with regard
to electronic filing would impose any
material additional costs on SROs.
Instead, the Commission believes that
the proposed amendments to Rule 19b–
7 and Form 19b–7, on balance, would
reduce paperwork costs related to the
submission of SRO proposed rule
changes. The technology for electronic
filing would be Web-based; therefore,
the SROs should not have any
technology expenditures for electronic
filing because all SROs currently have
access to the Internet.

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As previously stated, the SROs could
incur costs of eight hours annually to
post on their Web site their proposed
rules, and amendments thereto, no later
than two business days after filing with
the Commission. With regard to posting
of and updating of accurate and
complete text of SRO final rules, the
Commission believes that the proposal
would increase the burden associated
with complying with Rule 19b–7 by 48
hours and reduce the burden associated
with complying with Rule 19b–4 by 48
hours. In addition, the Commission does
not anticipate that SROs would incur
any additional costs in complying with
the change to Form 19b–4, which
proposes to add the word ‘‘officer’’ to
the Signature Box because the addition
of the word simply provides
transparency to an obligation that
already exists.37 Accordingly, the
Commission does not believe that SROs
would incur any additional costs in
posting this information on their Web
sites.
E. Retention Period of Recordkeeping
Requirements
The SROs would be required to retain
records of the collection of information
(the manually signed signature page of
the Form 19b–7) for a period of not less
than five years, the first two years in an
easily accessible place, according to the
current recordkeeping requirements set
forth in Rule 17a–1 under the Act.38 The
SROs would be required to retain
proposed rule changes, and any
amendments, on their Web sites until 60
days after effectiveness of the proposed
rule that is filed with both the
Commission and the CFTC or abrogation
of the proposed rule change.39 The SRO
would be required at all times to
maintain an accurate and up-to-date
copy of all of its rules on its Web site.40
F. Collection of Information Is
Mandatory
Any collection of information
pursuant to the proposed amendments
to Rule 19b–7 and Form 19b–7 to
require electronic filing with the
Commission of SRO proposed rule
changes would be a mandatory
collection of information filed with the
Commission as a means for the
Commission to review, and, as required,
take action with respect to SRO
proposed rule changes. Any collection
of information pursuant to the proposed
37 See

Section F of the Instructions to Form 19b–

4.
38 SROs may also destroy or otherwise dispose of
such records at the end of five years according to
Rule 17a–5 under the Act. 17 CFR 240.17a–5.
39 See proposed Rule 19b–7(f).
40 See proposed Rule 19b–7(g).

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amendments to require Web site posting
by the SROs of their proposed and final
rules would also be a mandatory
collection of information.
G. Responses to Collection of
Information Will Not Be Kept
Confidential
Other than information for which an
SRO requests confidential treatment and
which may be withheld from the public
in accordance with the provisions of 5
U.S.C. 522, the collection of information
pursuant to the proposed amendments
to Rule 19b–7 and Form 19b–7 under
the Act would not be confidential and
would be publicly available.41

sroberts on PROD1PC70 with PROPOSALS

H. Request for Comment
Pursuant to 44 U.S.C. 3505(c)(2)(B),
the Commission solicits comments to:
1. Evaluate whether the proposed
collection of information is necessary
for the performance of the functions of
the agency, including whether the
information shall have practical utility;
2. Evaluate the accuracy of the
agency’s estimate of the burden of the
proposed collection of information;
3. Enhance the quality, utility and
clarity of the information to be
collected; and
4. Minimize the burden of collection
of information on those who are to
respond, including through the use of
automated collection techniques or
other forms of information technology.
Persons wishing to submit comments
on the collection of information
requirements should direct them to the
following persons: (1) Desk Officer for
the Securities and Exchange
Commission, Office of Information and
Regulatory Affairs, OMB, Room 3208,
New Executive Office Building,
Washington, DC 20503; and (2) Nancy
M. Morris, Secretary, Securities and
Exchange Commission, Station Place,
100 F Street, NE., Washington, DC
20549–1090 with reference to File No.
S7–06–07. OMB is required to make a
decision concerning the collection of
information between 30 and 60 days
after publication, so a comment to OMB
is best assured of having its full effect
if OMB receives it within 30 days of
publication. The Commission has
submitted the proposed collection of
information to OMB for approval.
Requests for the materials submitted to
OMB by the Commission with regard to
this collection of information should be
41 However, consistent with applicable law,
proposed SRO rule changes containing proprietary
or otherwise sensitive information may be kept
confidential and nonpublic, including requests
submitted pursuant to the protection afforded for
such information in the Freedom of Information
Act, 5 U.S.C. 552.

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in writing, refer to File No. S7–06–07,
and be submitted to the Securities and
Exchange Commission, Records
Management, Office of Filings and
Information Services, Station Place, 100
F Street, NE., Washington, DC 20549.
V. Costs and Benefits of the Proposed
Rulemaking
The Commission is considering the
costs and benefits of the proposed
amendments to Rule 19b–7 and Form
19b–7 discussed above. As noted above,
the Commission staff estimates that the
total annual paperwork reporting
burden under the proposed rule would
be 155 hours. The Commission staff,
however, believes that there would be
an overall reduction of costs based on
the proposed amendments.42 The
Commission encourages commenters to
identify, discuss, analyze, and supply
relevant data regarding any such costs
or benefits.
A. Benefits
The proposed amendments are
designed to modernize the filing,
receipt, and processing of SRO proposed
rule changes and to make the SRO rule
filing process more efficient by
conserving both SRO and Commission
resources. The Commission believes
that the proposed changes to Rule 19b–
7 and Form 19b–7 would permit SROs
to file proposed rule changes with the
Commission more quickly and
economically. For example, SROs are
currently required to pay for delivery
costs of multiple paper copies to the
Commission, as well as the costs
associated with monitoring the
Commission’s Public Reference Room
for competitors’ rule filings. Requiring
SROs to electronically file proposed rule
changes under Rule 19b–7 should
reduce expenses associated with clerical
time, postage, and copying and should
increase the speed, accuracy, and
availability of information beneficial to
investors, other SROs, and financial
markets.
The Commission does not expect that
the proposed amendments would
impose additional costs on SROs.
Instead, the Commission believes that
the proposed amendments to Rule 19b–
7 and Form 19b–7, on balance, would
reduce costs related to the submission of
SRO proposed rule changes. The
technology for electronic filing would
be web-based; therefore, the SRO should
not have any material increase in
42 As noted in the Paperwork Reduction Act
analysis, the Commission staff based this total
reporting burden of 159 hours for filing proposed
rule changes and amendments + 8 hours for posting
proposed rule changes and amendments on the
SROs’ Web sites.

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technology expenditures for electronic
filing because all SROs currently have
access to the Internet. Accordingly, the
Commission believes that the proposed
amendments to Rule 19b–7 and Form
19b–7, by requiring the SROs to submit
proposed rule changes electronically,
would reduce their costs.
Because Commission staff would no
longer manually process the receipt and
distribution of SRO rule filings
submitted on Form 19b–7, electronic
filing would also expedite the
Commission’s receipt of SRO proposed
rule changes filed under Rule 19b–7 and
provide the SROs with the certainty that
the Commission has received the
proposed rule changes and has captured
pertinent information about the rule
changes in SRTS. Based on the
Commission’s experience with
electronic filing of Form 19b–4, the
Commission believes that integrating
this electronic filing technology with
SRTS should also enhance the
Commission’s ability to monitor and
process SRO proposed rule changes.
Moreover, requiring SROs to post
proposed rule changes filed under Rule
19b–7 on their Web sites no later than
two business days after filing with the
Commission should increase availability
of SRO proposed rules and thereby
facilitate the ability of interested parties
to comment on proposed rule changes.
For instance, the posting of these
proposed rule changes would provide
the public with access to the filings on
the SROs’ Web sites and thereby reduce
the burden on SRO and Commission
staff of providing information about
proposed rule changes to interested
parties. The Commission believes that
the posting of the proposed rule changes
submitted on Form 19b–7 would also
save SRO resources that are currently
being used to monitor the Commission’s
Public Reference Room for competitors’
proposed rule changes.
B. Costs
As noted, the Commission staff
estimates that the annual paperwork
reporting costs would be 155 hours
under the proposed rule. If the proposed
changes were adopted, the Commission
believes that SROs could incur some
costs associated with training their
personnel about the procedures for
submitting proposed rule changes
electronically and submission of the
information via EAUF. However, the
Commission believes that such costs
would be one-time costs and
insubstantial since the SROs are already
familiar with the information required
in filing a proposed rule change with
the Commission and would only be
required to submit the same information

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sroberts on PROD1PC70 with PROPOSALS

electronically under this proposal. The
Commission believes that the total
amount of one-time costs that SROs
would incur in training personnel how
to use EAUF is 50 hours. The
Commission staff believes that the SROs
could also incur some minimal costs
(currently $20 per year) associated with
purchasing digital IDs for each duly
authorized officer electronic
signatories.43 The Commission also
believes that the SROs would have to
make temporary adjustments to their
recordkeeping procedures since, under
the proposal, the SROs would be
required to print out the Form 19b–7
signature block, manually sign proposed
rule changes, and retain the manual
signature for not less than five years.
However, there should be no additional
costs associated with such
recordkeeping as SROs are currently
required to retain the Form 19b–7 for
not less than five years. The
Commission requests comment on the
anticipated costs, if any, on SROs to
comply with the proposed requirement
of retaining a manual signature of each
proposed rule change submitted
electronically.
Moreover, the Commission believes
that the proposed requirement that
SROs post proposed rule changes on
their Web sites would impose some but
not substantial costs on most SROs. The
Commission notes that no new costs
will be associated with posting a current
and complete version of their rules on
their Web site because currently all
SROs promptly post this information on
their Web sites pursuant to Rule 19b–
4(m). In addition, the Commission does
not anticipate that SROs would incur
any material additional costs in
complying with the change to Form
19b–4, which proposes to add the word
‘‘officer’’ to the Signature Box because
the addition of the word simply
provides transparency to an obligation
that already exists.44 Therefore, at all
times, each SRO should maintain a
current and complete set of its rules to
facilitate compliance with this
requirement. Accordingly, the
Commission does not believe that SROs
would incur substantial costs in simply
posting this information on their Web
sites because they should already be
doing so.
C. Request for Comment
The Commission requests data to
quantify the costs and the benefits
43 The Commission staff estimates that each SRO
will purchase five of their staff such digital IDs.
Thus, the annual cost of the digital ID for all SROs
would be $500 (5 SROs × $20 × 5).
44 See Section F of the Instructions to Form 19b–
4.

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above. The Commission seeks estimates
of these costs and benefits, as well as
any costs and benefits not already
defined, which could result from the
adoption of these proposed amendments
to Rule 19b–7 and Form 19b–7.
Specifically, the Commission requests
commenters to address whether
proposed amendments to Rule 19b–7
and Form 19b–7 that would require
electronic filing of SRO proposed rule
changes and the posting of these
proposed rule changes on the SROs’
Web sites would generate the
anticipated benefits or impose any
unanticipated costs on the SROs and the
public.
VI. Consideration of the Burden on
Competition, Promotion of Efficiency,
and Capital Formation
Section 3(f) of the Act 45 requires the
Commission, whenever it engages 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 Act 46 requires
the Commission, when promulgating
rules under the 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 Act.
The proposed amendments to Rule
19b–7 and Form 19b–7 are intended to
modernize the receipt and review of
SRO proposed rule changes and to make
the SRO rule filing process more
efficient by conserving both SRO and
Commission resources. They also are
intended to improve the transparency of
the SRO rule filing process and facilitate
access to current and complete sets of
SRO rules. In addition, none of these
changes would have an adverse impact
on competition or capital formation and
they would therefore benefit investors.
The Commission generally requests
comment on the competitive or
anticompetitive effects of these
amendments to Rule 19b–7 and Form
19b–7 on any market participants if
adopted as proposed. The Commission
also requests comment on what impact
the amendments, if adopted, would
have on efficiency and capital
formation. Commenters should provide
analysis and empirical data to support
their views on the costs and benefits
associated with the proposal.
45 15
46 15

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U.S.C. 78c(f).
U.S.C. 78w(a)(2).

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9419

VII. Regulatory Flexibility Act
Certifications
The Regulatory Flexibility Act
(‘‘RFA’’) 47 requires Federal agencies, in
promulgating rules, to consider the
impact of those rules on small entities.
Section 603(a) 48 of the Administrative
Procedure Act,49 as amended by the
RFA, generally requires the Commission
to undertake a regulatory flexibility
analysis of all proposed rules, or
proposed rule amendments, to
determine the impact of such
rulemaking on ‘‘small entities.’’50
Section 605(b) of the RFA specifically
states that this requirement shall not
apply to any proposed rule, or proposed
rule amendment, which if adopted,
would not ‘‘have a significant economic
impact on a substantial number of small
entities.’’
Proposed amendments to Rules 19b–
7 and Form 19b–7 would require SROs
to electronically file proposed rule
changes submitted pursuant to Section
19(b)(7)(A) of the Act and require SROs
to post all such proposed rule changes
on their Web sites. Only exchanges
registered with the Commission under
Section 6(g) of the Act and national
securities associations registered with
the Commission under Section 15A(k)
of the Act would be subject to the
proposed amendments to Rule 19b–7
and Form 19b–7. None of the exchanges
registered under Section 6(g) or national
securities associations registered with
the Commission under Section 15A(k)
that would be subject to the proposed
amendments are ‘‘small entities’’ for
purposes of the Regulatory Flexibility
Act.51
In addition, the proposal would make
certain conforming changes to Rule
47 5

U.S.C. 601 et seq.
U.S.C. 603(a).
49 5 U.S.C. 551 et seq.
50 Although Section 601(b) of the RFA defines the
term ‘‘small entity,’’ the statute permits agencies to
formulate their own definitions. The Commission
has adopted definitions for the term small entity for
the purposes of Commission rulemaking in
accordance with the RFA. Those definitions, as
relevant to this proposed rulemaking, are set forth
in Rule 0–10, 17 CFR 240.0–10. See Securities
Exchange Act Release No. 18451 (January 28, 1982),
47 FR 5215 (February 4, 1982).
51 See 17 CFR 240.0–10(e). Paragraph (e) of Rule
0–10 states that the term ‘‘small business,’’ when
referring to an exchange, means any exchange that
has been exempted from the reporting requirements
of Rule 601 of Regulation NMS, 17 CFR 242.601,
and is not affiliated with any person (other than a
natural person) that is not a small business or small
organization as defined in Rule 0–10. Under this
standard, none of the exchanges subject to the
proposed amendments to Rule 19b-7 and Form 19b7 is a ‘‘small entity’’ for the purposes of the RFA.
In addition, the NFA is not a ‘‘small entity’’ for
purposes of the RFA. See Securities Exchange Act
Release No. 44279 (May 8, 2001), 66 FR 26978,
26990 (May 15, 2001) (S7–10–01) (Rule 19b-7
Proposing Release).
48 5

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Federal Register / Vol. 72, No. 40 / Thursday, March 1, 2007 / Proposed Rules

19b–4 and Form 19b–4. National
securities exchanges and national
securities associations that would be
subject to the proposed amendments to
Rule 19b–4 and Form 19b–4 are not
‘‘small entities’’ for the purposes of the
RFA.52
For the above reasons, the
Commission certifies that the proposed
amendments to Rule 19b–4 and 19b–7
and Form 19b–4 and 19b–7, if adopted,
would not have a significant economic
impact on a substantial number of small
entities for purposes of the Regulatory
Flexibility Act. The Commission invites
commenters to address whether the
proposed rules would have a significant
economic impact on a substantial
number of small entities, and, if so,
what would be the nature of any impact
on small entities. The Commission
requests that commenters provide
empirical data to support the extent of
such impact.
VIII. Statutory Basis and Text of
Proposed Amendments
The amendments to Rule 19b–7 and
Form 19b–7 under the Act are being
proposed pursuant to 15 U.S.C. 78a et
seq., particularly sections 3(b), 6, 15A,
19(b), and 23(a) of the Act.
List of Subjects in 17 CFR Parts 240 and
249
Reporting and recordkeeping
requirements, Securities.
In accordance with the foregoing,
Title 17, Chapter II of the Code of
Federal Regulations is proposed to be
amended as follows:
PART 240—GENERAL RULES AND
REGULATIONS, SECURITIES
EXCHANGE ACT OF 1934
1. The authority citation for Part 240
continues to read in part 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, 80a–
20, 80a–23, 80a–29, 80a–37, 80b–3, 80b–4,
80b–11, and 7201 et seq.; and 18 U.S.C. 1350,
unless otherwise noted.

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*

*
*
*
*
2. Section 240.19b–4 is amended by
revising paragraph (m) to read as
follows:
52 See 17 CFR 240.0–10(e). Under this standard,
described supra in note 51, none of the exchanges
affected by the proposed amendments to Rule 19b–
4 and Form 19b–4 is a small entity for the purposes
of the RFA. The Commission has also found that
NASD is not a small entity.

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§ 240.19b–4 Filings with respect to
proposed rule changes by self-regulatory
organizations.

*

*
*
*
*
(m) Each self-regulatory organization
shall post and maintain a current and
complete version of its rules on its Web
site. The self-regulatory organization
shall update its Web site to reflect rule
changes filed pursuant to section
19(b)(2) of the Act (15 U.S.C. 78s(b)(2))
within two business days after it has
been notified of the Commission’s
approval of a proposed rule change, and
to reflect rule changes filed pursuant to
section 19(b)(3)(A) of the Act (15 U.S.C.
78s(b)(3)(A)) within two days of the
Commission’s notice of such proposed
rule change. If a rule change is not
effective for a certain period, the selfregulatory organization shall clearly
indicate the effective date in the
relevant rule text.
*
*
*
*
*
3. Section 240.19b–7 is amended by:
a. Adding a preliminary note;
b. Revising paragraphs (a) and (b)(1);
and
c. Adding paragraphs (d), (e), (f) and
(g).
The additions and revisions read as
follows:
§ 240.19b–7 Filings with respect to
proposed rule changes submitted pursuant
to Section 19(b)(7) of the Act.
Preliminary Note: A self-regulatory
organization also must refer to Form 19b–7
(17 CFR 249.822) for further requirements
with respect to the filing of proposed rule
changes.

(a) Filings with respect to proposed
rule changes by a self-regulatory
organization submitted pursuant to
section 19(b)(7) of the Act (15 U.S.C.
78s(b)(7)) shall be made electronically
on Form 19b–7 (17 CFR 249.822).
(b) * * *
(1) A completed Form 19b–7 (17 CFR
249.822) is submitted electronically;
and
*
*
*
*
*
(d) Filings with respect to proposed
rule changes by a self-regulatory
organization submitted on Form 19b–7
(17 CFR 249.822) electronically shall
contain an electronic signature. For the
purposes of this section, the term
electronic signature means an electronic
entry in the form of a magnetic impulse
or other form of computer data
compilation of any letter or series of
letters or characters comprising a name,
executed, adopted or authorized as a
signature. The signatory to an
electronically submitted rule filing shall
manually sign a signature page or other
document, in the manner prescribed by
Form 19b–7, authenticating,

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acknowledging or otherwise adopting
his or her signature that appears in
typed form within the electronic filing.
Such document shall be executed before
or at the time the rule filing is
electronically submitted and shall be
retained by the filer in accordance with
17 CFR 240.17a–1.
(e) If the conditions of this section
and Form 19b–7 (17 CFR 249.822) are
otherwise satisfied, all filings submitted
electronically on or before 5:30 p.m.
Eastern Standard Time or Eastern
Daylight Saving Time, whichever is
currently in effect, on a business day,
shall be deemed filed on that business
day, and all filings submitted after 5:30
p.m. Eastern Standard Time or Eastern
Daylight Saving Time, whichever is
currently in effect, shall be deemed filed
on the next business day.
(f) The self-regulatory organization
shall post the proposed rule change, and
any amendments thereto, submitted on
Form 19b–7 (17 CFR 249.822), on its
Web site within two business days after
the filing of the proposed rule change,
and any amendments thereto, with the
Commission. Unless the self-regulatory
organization withdraws the proposed
rule change or is notified that the
proposed rule change is not properly
filed, such proposed rule change and
amendments shall be maintained on the
self-regulatory organization’s Web site
until 60 days after:
(1) The filing of a written certification
with the Commodity Futures Trading
Commission under section 5c(c) of the
Commodity Exchange Act (7 U.S.C. 7a–
2(c));
(2) The Commodity Futures Trading
Commission determines that review of
the proposed rule change is not
necessary; or
(3) The Commodity Futures Trading
Commission approves the proposed rule
change; and
(4) In the case of a proposed rule
change, or any amendment thereto, that
has been withdrawn or not properly
filed, the self-regulatory organization
shall remove the proposed rule change,
or any amendment, from its Web site
within two business days of notification
of improper filing or withdrawal by the
self-regulatory organization of the
proposed rule change.
(g) Each self-regulatory organization
shall post and maintain a current and
complete version of its rules on its Web
site. The self-regulatory organization
shall update its Web site to reflect rule
changes filed pursuant to section
19(b)(7) of the Act (15 U.S.C. 78s(b)(7))
within two business days after it takes
effect upon filing of a written
certification with the Commodity
Futures Trading Commission under

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Federal Register / Vol. 72, No. 40 / Thursday, March 1, 2007 / Proposed Rules
section 5c(c) of the Commodity
Exchange Act (7 U.S.C. 7a–2(c)), upon a
determination by the Commodity
Futures Trading Commission that
review of the proposed rule change is
not necessary, or upon approval by the
Commodity Futures Trading
Commission. If a rule change is not
effective for a certain period, the selfregulatory organization shall clearly
indicate the effective date in the
relevant rule text.
PART 249—FORMS, SECURITIES
EXCHANGE ACT OF 1934
4. The authority citation for Part 249
continues to read in part as follows:
Authority: 15 U.S.C. 78a et seq. and 7201
et seq.; and 18 U.S.C. 1350, unless otherwise
noted.

5. Section 249.822 is revised to read
as follows:
§ 249.822 Form 19b–7, for electronic filing
with respect to proposed rule changes by
self-regulatory organizations under Section
19(b)(7)(A) of the Securities Exchange Act
of 1934.

This form shall be used by selfregulatory organizations, as defined in
section 3(a)(25) of the Securities
Exchange Act of 1934 (15 U.S.C.
78c(a)(25)), to file electronically
proposed rule changes with the
Commission pursuant to section 19(b)(7)
of the Act (15 U.S.C. 78s(b)(7)) and
§ 240.19b–7 of this chapter.
6. Form 19b–7 (referenced in
§ 249.822) is revised to read as follows:
[Note: Form 19b–7 is attached as Appendix
A to this document.]
[Note: The text of Form 19b–7 will not
appear in the Code of Federal Regulations.]
Dated: February 23, 2007.
By the Commission.
Nancy M. Morris,
Secretary.

Appendix A—General Instructions for
Form 19b–7

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A. Use of the Form
All self-regulatory organization proposed
rule changes submitted pursuant to Section
19(b)(7) of the Securities Exchange Act of
1934 (‘‘Act’’), shall be filed electronically
through the Electronic Form Filing System
(‘‘EFFS’’), a secure Web site operated by the
Commission. This form shall be used for
filings of proposed rule changes by all selfregulatory organizations pursuant to Section
19(b)(7) of the 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 self-regulatory
organizations for purposes of this form.

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B. Need for Careful Preparation of the
Completed Form, Including Exhibits
This form, including the exhibits, is
intended to elicit information necessary for
the public to provide meaningful comment
on the proposed rule change and 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. The self-regulatory
organization must provide all the information
called for by the form, including the exhibits,
and must present the information in a clear
and comprehensible manner.
The proposed rule change shall be
considered filed with the Commission on the
date on which the Commission receives the
proposed rule change if the filing complies
with all requirements of this form. Any filing
that does not comply with the requirements
of this form may be returned to the selfregulatory organization at any time before the
issuance of the notice of filing. Any filing so
returned shall for all purposes be deemed not
to have been filed with the Commission. See
also Rule 0–3 under the Act (17 CFR 240.0–
3).
C. Documents Comprising the Completed
Form
The completed form filed with the
Commission shall consist of the Form 19b–
7 Page 1, numbers and captions for all items,
responses to all items, and exhibits required
in Instruction H. In responding to an item,
the completed form may omit the text of the
item as contained herein if the response is
prepared to indicate to the reader the
coverage of the item without the reader
having to refer to the text of the item or its
instructions. Each filing shall be marked on
the Form 19b–7 with the initials of the selfregulatory organization, the four-digit year,
and the number of the filing for the year (i.e.,
SRO–YYYY–XX). If the self-regulatory
organization is filing Exhibit 2 or 3 via paper,
the exhibits must be filed within 5 business
days of the electronic submission of all other
required documents.
D. Amendments
If information on this form is or becomes
inaccurate before the proposed rule change
becomes effective, the self-regulatory
organization shall file amendments
correcting any such inaccuracy. Amendments
shall be filed as specified in Instruction E.
Amendments to a filing shall include the
Form 19b–7 Page 1 marked to number
consecutively the amendments, numbers and
captions for each amended item, amended
response to the item, and required exhibits.
The amended description in Section II. A. 1.
of Exhibit 1 shall explain the purpose of the
amendment and, if the amendment changes
the purpose of or basis for the proposed rule
change, the amended response shall also
provide a revised purpose and basis
statement for the proposed rule change.
Exhibit 1 shall be re-filed if there is a
material change from the immediately
preceding filing in the language of the
proposed rule change or in the information
provided.

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If the amendment alters the text of an
existing rule, the amendment shall include
the text of the existing rule, marked in the
manner described in Section I. of Exhibit 1
using brackets to indicate words to be deleted
from the existing rule and underscoring to
indicate words to be added. The purpose of
this marking requirement is to maintain a
current copy of how the text of the existing
rule is being changed.
If the self-regulatory organization is
amending only part of the text of a lengthy
proposed rule change, it may, with the
Commission’s permission, file only those
portions of the text of the proposed rule
change in which changes are being made if
the filing (i.e., partial amendment) is clearly
understandable on its face. Such partial
amendment shall be clearly identified and
marked to show deletions and additions.
If, after the rule change is filed but before
it becomes effective, the self-regulatory
organization receives or prepares any
correspondence or other communications
reduced to writing (including comment
letters) to and from such self-regulatory
organization concerning the proposed rule
change, the communications shall be filed as
Exhibit 2. If information in the
communication makes the rule change filing
inaccurate, the filing shall be amended to
correct the inaccuracy. If such
communications cannot be filed
electronically in accordance with Instruction
E, the communications shall be filed in
accordance with Instruction F.
E. Signature and Filing of the Completed
Form
All proposed rule changes, amendments,
extensions, and withdrawals of proposed rule
changes shall be filed through the EFFS. In
order to file Form 19b–7 through EFFS, selfregulatory organizations must request access
to the SEC’s External Application Server by
completing a request for an external account
user ID and password for the use of the
External Application User Authentication
Form.
Initial requests will be received by
contacting the Market Regulation
Administrator located on our Web site
(http://www.sec.gov). An e-mail will be sent
to the requestor that will provide a link to a
secure Web site where basic profile
information will be requested.
A duly authorized officer of the selfregulatory organization shall electronically
sign the completed Form 19b–7 as indicated
on Page 1 of the Form. In addition, a duly
authorized officer of the self-regulatory
organization shall manually sign one copy of
the completed Form 19b–7, and the manually
signed signature page shall be maintained
pursuant to Section 17 of the Act.
F. Procedures for Submission of Paper
Documents for Exhibits 2 and 3
To the extent that Exhibit 2 or 3 cannot be
filed electronically in accordance with
Instruction E, four copies of Exhibit 2 or 3
shall be filed with the Division of Market
Regulation, Securities and Exchange
Commission, 100 F Street, NE., Washington,
DC 20549–6628. Page 1 of the electronic
Form 19b–7 shall accompany paper

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submissions of Exhibit 2 or 3. If the selfregulatory organization is filing Exhibit 2 or
3 via paper, they must be filed within five
days of the electronic filing of all other
required documents.
G. Withdrawals of Proposed Rule Changes
If a self-regulatory organization determines
to withdraw a proposed rule change, it must
complete Page 1 of the Form 19b–7 and
indicate by selecting the appropriate check
box to withdraw the filing.

sroberts on PROD1PC70 with PROPOSALS

H. Exhibits
List of exhibits to be filed, as specified in
Instructions C and D:
Exhibit 1. Completed Notice of Proposed
Rule Change for publication in the Federal
Register. It is the responsibility of the selfregulatory organization to prepare Items I, II
and III of the notice. Leave a 1-inch margin
at the top, bottom, and right hand side, and
a 11⁄2 inch margin at the left hand side.
Number all pages consecutively. Double
space all primary text and single space lists
of items, quoted material when set apart from
primary text, footnotes, and notes to tables.
Amendments to Exhibit 1 should be filed in
accordance with Instructions D and E.
Exhibit 2. (a) Copies of notices issued by
the self-regulatory organization soliciting
comment on the proposed rule change and
copies of all written comments on the
proposed rule change received by the selfregulatory organization (whether or not
comments were solicited), presented in
alphabetical order, together with an
alphabetical listing of such comments. If
such notices and comments cannot be filed
electronically in accordance with Instruction
E, the notices and comments shall be filed in
accordance with Instruction F.
(b) Copies of any transcript of comments
on the proposed rule change made at any
public meeting or, if a transcript is not
available, a copy of the summary of

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comments on the proposed rule change made
at such meeting. If such transcript of
comments or summary of comments cannot
be filed electronically in accordance with
Instruction E, the transcript of comments or
summary of comments shall be filed in
accordance with Instruction F.
(c) Any correspondence or other
communications reduced to writing
(including comment letters and e-mails)
concerning the proposed rule change
prepared or received by the self-regulatory
organization. All correspondence or other
communications should be presented in
alphabetical order together with an
alphabetical listing of the authors, and shall
be filed in accordance with Instruction E. If
such communications cannot be filed
electronically in accordance with Instruction
E, the communications shall be filed in
accordance with Instruction F.
(d) If after the proposed rule change is filed
but before it becomes effective, the selfregulatory organization prepares or receives
any correspondence or other
communications reduced to writing
(including comment letters and e-mails) to
and from such self-regulatory organization
concerning the proposed rule change, the
communications shall be filed in accordance
with Instruction E. All correspondence or
other communications should be presented
in alphabetical order together with an
alphabetical listing of the authors. If such
communications cannot be filed
electronically in accordance with Instruction
E, the communications shall be filed in
accordance with Instruction F.
Exhibit 3. If any form, report, or
questionnaire is
(a) Proposed to be used in connection with
the implementation or operation of the
proposed rule change, or
(b) Prescribed or referred to in the
proposed rule change, then the form, report,

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or questionnaire must be attached and shall
be considered as part of the proposed rule
change. If completion of the form, report or
questionnaire is voluntary or is required
pursuant to an existing rule of the selfregulatory organization, then the form,
report, or questionnaire, together with a
statement identifying any existing rule that
requires completion of the form, report, or
questionnaire, shall be attached as Exhibit 3.
If the form, report, or questionnaire cannot be
filed electronically in accordance with
Instruction E, the documents shall be filed in
accordance with Instruction F.
Exhibit 4. The self-regulatory organization
must attach as Exhibit 4 proposed changes to
its rule text. Changes in, additions to, or
deletions from, any existing rule shall be set
forth with brackets used to indicate words to
be deleted and underscoring used to indicate
words to be added. Exhibit 4 shall be
considered part of the proposed rule change.
Exhibit 5. The self-regulatory organization
must attach one of the following:
Certificate of Effectiveness of Proposed
Rule Change: Attach a copy of the
certification submitted to the CFTC pursuant
to Section 5c(c) of the Commodity Exchange
Act.
CFTC Request or Determination that
Review of the Proposed Rule Change is Not
Necessary: Attach a copy of any request
submitted to the CFTC for 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.
Request for CFTC Approval of Proposed
Rule Change: Attach 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.
BILLING CODE 8010–01–P

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Information To Be Included in the
Completed Exhibit 1

sroberts on PROD1PC70 with PROPOSALS

SECURITIES AND EXCHANGE
COMMISSION
(Release No. 34–
File No. SR–
[SRO Name]–[YYYY]–[XX])
Self-Regulatory Organizations;
Proposed Rule Change by [Name of SelfRegulatory Organization] Relating to
[brief description of the subject matter
of the proposed rule change].
Pursuant to Section 19(b)(7) of the
Securities Exchange Act of 1934
(‘‘Act’’),53 notice is hereby given that on
[date 54], 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 this proposed rule change
concurrently with the Commodity
Futures Trading Commission (‘‘CFTC’’).
[Section 19(b)(7)(B) 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:]
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 and Text 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
53 15

U.S.C. 78s(b)(7).
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 for Form 19b–7.
54 To

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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
In its filing with the Commission, the
self-regulatory organization 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.
The self-regulatory organization 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
[Provide a statement of the purpose of
the proposed rule change. The statement
must describe the text of the proposed
rule change in a sufficiently detailed
and specific manner as to enable the
public to provide meaningful comment
on the proposal. At a minimum, the
statement should:
(a) [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
persons (e.g. brokers, dealers, issuers,
and investors), and any significant
problems known to the self-regulatory
organization that persons affected are
likely to have in complying with the
proposed rule change; and]
(b) [Describe how the proposed rule
change relates to existing rules of the
self-regulatory organization. If the selfregulatory organization reasonably
expects that the proposed rule change
will have any direct effect, or significant
indirect effect, on the application of any
other rule of the self-regulatory
organization, set forth the designation or
title of any such rule and describe the
anticipated effect of the proposed rule
change on the application of such other
rule. Include the file numbers for prior
filings with respect to any existing rule
specified.]

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2. Statutory Basis
[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. Certain limitations that
the Act imposes on self-regulatory
organizations are summarized in the
notes that follow.
Note 1. National Securities Exchanges.
Under Section 6 of the Act, rules of a
national securities exchange may not permit
unfair discrimination between customers,
issuers, brokers, or dealers, and may not
regulate, by virtue of any authority conferred
by the Act, matters not related to the
purposes of the Act or the administration of
the self-regulatory organization.
Note 2. Limited Purpose National
Securities Associations. Under Section
15A(k) of the Act, rules of a national
securities association registered for the
limited purpose of regulating the activities of
members who are registered as brokers or
dealers in security futures products must be
designed to prevent fraudulent and
manipulative acts and practices, to promote
just and equitable principles of trade, and, in
general to protect investors and the public
interest, including rules governing sales
practices and the advertising of security
futures products reasonably comparable to
those of other national securities associations
registered pursuant to Section 15A(a) that are
applicable to security futures products. The
rules may not be designed to regulate, by
virtue of any authority conferred by the Act,
matters not related to the purposes of the Act
or the administration of the association.]

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 have an impact on
competition and, if so
(i) State whether the proposed rule
change will impose any burden on
competition or whether it will relieve
any burden on, or otherwise promote,
competition, and
(ii) Specify the particular categories
of persons and kinds of businesses on
which any burden will be imposed and
the ways in which the proposed rule
change will affect them.
• Explain why any burden on
competition is not undue; or, if the self-

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regulatory organization does not believe
that the burden on competition is
significant, explain why.
In providing those explanations, set
forth and respond in detail to written
comments as to any significant impact
or burden on competition perceived by
any person who has made comments on
the proposed rule change to the selfregulatory organization.]
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
[If written comments were received
(whether or not comments were
solicited) from members of or
participants in the self-regulatory
organization or others, summarize the
substance of all such comments
received and respond in detail to any
significant issues that those comments
raised about the proposed rule change.
If an issue is summarized and
responded to in detail under Section
II.A.1. or Section II.B. of this Form 19b–
7 Notice, that response need not be
duplicated if appropriate cross-reference
is made to the place where the response
can be found. If comments were not or
are not to be solicited, so state.]
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action

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[The self-regulatory organization shall
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

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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].
At any time 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 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–[SRO]–[YYYY]–[XX] on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.

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All submissions should refer to File
Number SR–[SRO]–[YYYY]–[XX]. 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 the [SRO]. 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 publicly available. All
submissions should refer to File
Number SR–[SRO]–[YYYY]–[XX] and
should be submitted on or before March
22, 2007.
For the Commission, by the Division
of Market Regulation, pursuant to
delegated authority.55
Secretary.
Appendix B
55 17

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BILLING CODE 8010–01–C