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CFR Citation: 17 CFR Parts 200 and 241

DOCUMENT ID: [Release No. 34-58092]

NOTICE: Part V

DOCUMENT ACTION: Final rule and interpretation.

SUBJECT CATEGORY: Commission Guidance and Amendment to the Rules Relating to Organization and Program Management Concerning Proposed Rule Changes Filed by Self-Regulatory Organizations

DATES: Effective Date: July 11, 2008.

DOCUMENT SUMMARY: The Securities and Exchange Commission (``Commission'') is providing guidance regarding a rule under the Securities Exchange Act of 1934 (``Exchange Act'') concerning filings with respect to proposed rule changes of selfregulatory organizations (``SROs'') that the Commission expects will streamline the process by which SROs file proposed rule changes with the Commission and result in a broader range of rule changes qualifying for immediate effectiveness. Further, the Commission is amending its rules to delegate authority to the Director of the Division of Trading and Markets. These actions are intended to facilitate more expeditious handling of proposed rule changes submitted by SROs pursuant to Exchange Act section 19(b).

SUMMARY: Securities and Exchange Commission,

FOR FURTHER INFORMATION CONTACT Marlon Quintanilla Paz, Senior Counsel to the Director, at (202) 5515703, or Richard Holley III, Senior Special Counsel, at (202) 5515614, Division of Trading and Markets, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 205496628.

I. Introduction

Selfregulation, with oversight by the Commission, is a basic premise of the Exchange Act. For example, Congress recognized the regulatory role of national securities exchanges in section 6 of the Exchange Act,\1\ requiring all existing securities exchanges to register with the Commission and to function as selfregulatory organizations. SROs (such as exchanges, registered national securities associations, and clearing agencies) are subject to various requirements under the Exchange Act, including the requirement in section 19(b) and Rule 19b4 thereunder \2\ to file their proposed rule changes with the Commission. Commission review and the public comment process are intended, among other things, to help ensure that SROs carry out the purposes of the Exchange Act.\3\
\1\ 15 U.S.C. 78f.
\2\ 15 U.S.C. 78s(b) and 17 CFR 240.19b4, respectively. See also Form 19b4. The rule filing requirements of Section 19(b) also apply to other SROs, such as national securities associations, clearing agencies, and the Municipal Securities Rulemaking Board (``MSRB'').
\3\ See Section 19 of the Exchange Act, 15 U.S.C. 78s. See also Market 2000: An Examination Of Current Equity Market Developments, Study VI, Division of Market Regulation, U.S. Securities and Exchange Commission (January 1994).

National securities exchanges registered under section 6(a) of the Exchange Act \4\ face increased competitive pressures from entities that trade the same or similar financial instruments, such as foreign exchanges, futures exchanges,\5\ electronic communications networks (``ECNs''), and alternative trading systems (``ATSs''). These competitors, however, can change their trading rules or trade new products with greater ease and without the required Commission review.\6\
\4\ 15 U.S.C. 78f(a).
\5\ Certain futures exchanges are also registered as national securities exchanges under Section 6(g) of the Exchange Act, 15 U.S.C. 78f(g), solely for the purpose of trading security futures products.
\6\ While a security futures exchange registered under Section 6(g) of the Exchange Act is required to file certain proposed rule changes with the Commission, few such filings must receive Commission approval under Section 19(b)(2). If they must be filed at all, most may be filed under Section 19(b)(3)(A) of the Exchange Act. See 15 U.S.C. 78f(g)(4)(B).

The Commission previously has stated its belief that, ``investors are best served by a regulatory structure that facilitates fair and vigorous competition among market participants and fosters investor protection'' and that, ``[e]nhancing the SROs'' ability to implement and to respond quickly to changes in the marketplace should encourage innovation and better services to investors. * * *'' \7\ Consequently, the Commission periodically has revised the SRO rule filing requirements to balance the needs of the exchanges in a competitive financial marketplace against maintaining the statutorily required Commission oversight of the SROs and the SRO rule change process. \7\ Securities Exchange Act Release No. 43860 (January 19, 2001), 66 FR 8912 (February 5, 2001) (S70301) (``Rule 19b6 Proposing Release'').

In 1994, the Commission adopted amendments to Rule 19b4 to allow certain noncontroversial proposed rule changes and proposed rule changes for minor systems changes to ``become immediately effective'' upon filing and without Commission approval.\8\ In 1998, the Commission again amended Rule 19b4 to allow for the listing and trading of certain derivative securities products without prior submission of a proposed rule change under section 19(b).\9\ The 1998 rulemaking was intended to speed the introduction of new derivative securities products and enable exchanges to remain competitive with foreign and overthecounter derivatives markets that are not subject to section 19(b).
\8\ See Securities Exchange Act Release No. 35123 (December 20, 1994), 59 FR 66692 (December 28, 1994) (S71794) (``Non
Controversial Rule Adopting Release'').
\9\ See Securities Exchange Act Release No. 40761 (December 8, 1998), 63 FR 70952 (December 22, 1998) (S71398) (``New Products Adopting Release'').

In 2001, the Commission proposed comprehensive changes to the SRO rule filing process.\10\ The Commission proposed to completely replace Rule 19b4, the rule governing the requirements for SRO rule filings, with proposed new Rule 19b6. Proposed Rule 19b6, among other things, would have defined terms used in proposed Rule 19b6 to allow most exchange trading rules, other than proposals involving fundamental market structure changes, to be immediately effective upon filing with the Commission pursuant to section 19(b)(3)(A) of the Exchange Act. The Commission also proposed related changes that would have imposed a number of new obligations on SROs filing proposed rule changes with the Commission. For example, in proposed Rule 19b6, the Commission would have required, among other things, that a senior SRO official certify the accuracy and completeness of the proposal. The Commission also proposed to eliminate the 30day operational date and the fiveday pre filing requirement for noncontroversial rule filings.

\10\ See Rule 19b6 Proposing Release, supra note 7.

The Commission received 21 comment letters on proposed Rule 19b6, many of which opposed various aspects of the proposal, though for widely divergent reasons. Four commenters explicitly supported the proposal to make certain trading rules effective upon filing.\11\ Several SROs believed that the proposal provided only minor benefits that were potentially outweighed by new burdensome requirements.\12\ A few
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commenters believed that the category of trading rules eligible for immediate effectiveness was too narrow, or that more objective standards were needed to determine what qualifies as a trading rule.\13\ In contrast, other commenters were concerned that the proposal might reduce the opportunity to comment on proposed rule changes,\14\ and that the Commission might be hesitant to abrogate immediately effective filings.\15\ Several commenters explicitly opposed making certain types of trading rules immediately effective, noting that such rule changes may have particular importance to the public or have a major impact on market participants.\16\ Several commenters also opposed the proposal to remove the operative delay \17\ from Rule 19b4(f)(6).\18\ In addition, several commenters expressed support for Commission issuance of notice of a proposed rule change within 10 business days or such longer period as the SRO consents.\19\ \11\ See Comment letters from Nasdaq (dated April 6, 2001); the Pacific Exchange (dated April 24, 2001); Bloomberg Tradebook LLC (dated April 5, 2001); and the Chicago Stock Exchange (dated April 5, 2001).
\12\ See, e.g., Comment letters from The Options Clearing Corporation (dated April 6, 2001); the Philadelphia Stock Exchange (dated April 6, 2001); the Chicago Stock Exchange (dated April 5, 2001); the International Securities Exchange (dated March 23, 2001); and the Chicago Board Options Exchange (dated April 11, 2001). \13\ See, e.g., Comment letters from Credit Suisse First Boston (dated March 26, 2001); the International Securities Exchange (dated March 23, 2001); the Philadelphia Stock Exchange (dated April 6, 2001); the Pacific Exchange (dated April 24, 2001); Nasdaq (dated April 6, 2001); the Chicago Board Options Exchange (dated April 11, 2001); the Chicago Stock Exchange (dated April 5, 2001); and the Mercatus Center of George Mason University (dated April 9, 2001). \14\ See, e.g., Comment letters from the Investment Company Institute (dated April 6, 2001); Bloomberg Tradebook LLC (dated April 5, 2001); Brunelle & Hadjikow (dated April 4, 2001); the Consumer Federation of America (dated April 6, 2001); the Securities Industry Association (dated April 6, 2001); and the American Council of Life Insurers (dated April 10, 2001). See discussion below in Section III.A.2(b) regarding the importance of public comment to the SRO proposed rule change process.
\15\ See, e.g., Comment letters from Credit Suisse First Boston (dated March 26, 2001); the Council of Institutional Investors (dated March 26, 2001); the Investment Company Institute (dated April 6, 2001); and the Consumer Federation of America (dated April 6, 2001). See discussion below in Section IV regarding abrogation of immediately effective proposals.
\16\ See, e.g., Comment letters from the Securities Industry Association (dated April 6, 2001) and Brunelle & Hadjikow (dated April 4, 2001). These commenters believed that entities that are familiar with the technology and operation of SRO trading systems should be given an opportunity to comment on proposed changes to such systems. See Section III.A.2(b), below (``Opportunity for Public Comment With Regard to Immediately Effective Rule Filings''). \17\ A proposed rule change designated immediately effective normally becomes operative upon filing with the Commission, except for a proposal submitted pursuant to Rule 19b4(f)(6), which becomes operative 30 days after the date of filing with the Commission or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. 17 CFR 240.19b 4(f)(6)(iii).
\18\ See, e.g., Comment letters from the Investment Company Institute (dated April 6, 2001); the State of Wisconsin Investment Board (dated March 28, 2001); Brunelle & Hadjikow (dated April 4, 2001); the Consumer Federation of America (dated April 6, 2001); the Securities Industry Association (dated April 6, 2001); and the American Council of Life Insurers (dated April 10, 2001). One commenter suggested that a delay between the effective and operative date would allow the Commission to abrogate a rule with a minimum of disruption to an SRO's operations. See Comment letter from the State of Wisconsin Investment Board (dated March 28, 2001).
\19\ See Comment letters from Credit Suisse First Boston (dated March 26, 2001); the Chicago Stock Exchange (dated April 5, 2001); the Philadelphia Stock Exchange (dated April 6, 2001); Nasdaq (dated April 6, 2001); the Securities Industry Association (dated April 6, 2001); the Pacific Exchange (dated April 24, 2001); the Government Securities Clearing Corporation (dated March 20, 2001); NASD Dispute Resolution and NASD Regulation (dated May 3, 2001). One commenter suggested that the Commission publish notice of a proposed rule change within ten calendar days, not business days, and recommended that there be a mechanism to ensure compliance with the requirement. See Comment letter from the Chicago Board Options Exchange (dated April 11, 2001).

The Commission has considered thoroughly all of these comments. The Commission is not taking action today on proposed Rule 19b6 nor with regard to any of the other related changes,\20\ but the Commission's action in this release is consistent with the objectives underlying the Rule 19b6 proposal and takes into account the varying views expressed in the comments.
\20\ For example, the Commission is taking no further action at this time on the Rule 19b6 proposal to require certifications or to remove the prefiling or operative delay from Rule 19b4(f)(6) under the Exchange Act.

The Commission notes that the guidance and rule adopted herein do not alter the existing legal obligations for SROs filing proposed rule changes. The Commission today is not modifying or replacing Rule 19b4, nor is it imposing related obligations on SROs with regard to the rule filing process and, therefore, the Commission believes that the additional requirements proposed in the Rule 19b6 Proposing Release are not necessary at this time. As discussed below, the guidance in this release addresses a much narrower part of the SRO rule filing process and imposes no new obligations on SROs.

The Commission believes that it is now appropriate to issue guidance related to the filing of certain immediately effective proposed rule changes by SROs and to adopt a rule amendment designed to streamline further the SRO proposed rule change process. Specifically, the Commission today is (1) providing an interpretation of the Commission's views as to which SRO rule filings could be filed as immediately effective and (2) modifying only its own internal processes.

II. Background on the Current Rule Filing Process

Section 19(b)(1) of the Exchange Act requires an SRO to file with the Commission any proposed rule change,\21\ which must be ``accompanied by a concise general statement of the basis and purpose of such proposed rule change'' and be submitted electronically on Form 19b4, in accordance with the General Instructions thereto.\22\ Exhibit 1 of Form 19b4 requires an SRO to prepare the notice of its proposed rule change for publication in the Federal Register.\23\ A proposed rule change may not take effect unless it is approved by the Commission \24\ or becomes immediately effective upon filing pursuant to section 19(b)(3)(A) of the Exchange Act.\25\
\21\ Section 19(b)(1) of the Exchange Act defines a ``proposed rule change'' as ``any proposed rule, or any proposed change in, addition to, or deletion from the rules of'' an SRO. 15 U.S.C. 78s(b)(1). Section 3(a)(27) of the Exchange Act defines ``rules'' to include ``the constitution, articles of incorporation, bylaws, and rules, or instruments corresponding to the foregoing * * * and such of the stated policies, practices, and interpretations of such exchange, association, or clearing agency as the Commission, by rule, may determine to be necessary or appropriate in the public interest or for the protection of investors to be deemed to be rules of such exchange, association, or clearing agency.'' 15 U.S.C. 78c(a)(27).
\22\ 17 CFR 249.819. Among other things, the General
Instructions to Form 19b4 specify that an SRO's proposal must be clear and complete before it will be accepted as filed by the Commission. See General Instruction B to Form 19b4 (``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 the proposed rule change is consistent with the requirements of the [Exchange] Act and the rules and regulations thereunder * * * 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 * * * Any filing that does not comply with the requirements of this form may be returned to the [SRO] 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 03 under the Exchange Act, 17 CFR 240.03 (``The date on which papers are actually received by the Commission shall be the date of filing thereof if all of the requirements with respect to the filing have been complied with. * * *'').
\23\ If the conditions of Rule 19b4 and Form 19b4 are
satisfied, a proposed rule change submitted electronically via the Commission's Electronic Form Filing System on or before 5:30 p.m. Eastern Time on a business day is deemed ``filed'' on that business day, and all filings submitted after 5:30 p.m. Eastern Time are deemed filed on the next business day. See Rule 19b4(k), 17 CFR 240.19b4(k).
\24\ See 15 U.S.C. 78s(b)(2).
\25\ 15 U.S.C. 78s(b)(3)(A).

A. Proposals Subject to Commission Approval

For those proposals that are subject to Commission approval, section 19(b)(2) of the Exchange Act specifies the standards and time periods for Commission action either to approve a proposed rule change or to institute proceedings to determine whether a
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proposed rule change should be disapproved.\26\ After expiration of the applicable comment period and due consideration of any comment letters received, the Commission shall approve a proposed rule change if it finds such proposed rule change is consistent with the requirements of the Exchange Act and the rules and regulations thereunder applicable to the SRO.\27\ The Commission shall disapprove a proposed rule change if it cannot make such a finding.\28\
\26\ See 15 U.S.C. 78s(b)(2). The Commission must either approve or institute disapproval proceedings within thirtyfive days of the date of publication of notice of the filing in the Federal Register, or within such longer period as the Commission may designate (up to ninety days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding) or as to which the SRO consents. See id.
\27\ The Commission may approve a proposed rule change on an accelerated basis prior to the 30th day after publication of the notice in the Federal Register if it finds good cause and publishes its reasons for so doing. See id.
\28\ See id.

B. Immediately Effective Proposals

Section 19(b)(3)(A) of the Exchange Act provides that, notwithstanding the provisions of section 19(b)(2), a proposed rule change may take effect upon filing with the Commission if designated by the SRO as:
(i) Constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of the selfregulatory organization;
(ii) Establishing or changing a due, fee, or other charge imposed by the selfregulatory organization; or
(iii) Concerned solely with the administration of the self regulatory organization or other matters which the Commission, by rule * * * may specify * * *.\29\

\29\ 15 U.S.C. 78s(b)(3)(A).

Section 19(b)(3)(A)(iii) of the Exchange Act grants the Commission authority to expand the scope of proposed rule changes entitled to qualify for immediate effectiveness to other matters which the Commission, by rule, consistent with the public interest and the purposes of section 19(b) of the Exchange Act, may specify. Rule 19b 4(f) under the Exchange Act \30\ specifies the following types of proposed rule changes that may take effect upon filing with the Commission pursuant to section 19(b)(3)(A) if properly designated by an SRO as:
\30\ 17 CFR 240.19b4(f).
(1) Constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule;
(2) Establishing or changing a due, fee, or other charge applicable to a member;
(3) Concerned solely with the administration of the selfregulatory organization;
(4) Effecting a change in an existing service of a registered clearing agency that: (i) Does not adversely affect the safeguarding of securities or funds in the custody or control of the clearing agency or for which it is responsible; and (ii) does not significantly affect the respective rights or obligations of the clearing agency or persons using the service;
(5) Effecting a change in an existing orderentry or trading system of a selfregulatory organization that: (i) Does not significantly affect the protection of investors or the public interest; (ii) does not impose any significant burden on competition; and (iii) does not have the effect of limiting the access to or availability of the system; or
(6) Effecting a change that: (i) Does not significantly affect the protection of investors or the public interest; (ii) does not impose any significant burden on competition; and (iii) by its terms, does not become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest; provided that the selfregulatory organization has given the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change (the ``prefiling''), or such shorter time as designated by the Commission.\31\
\31\ The fiveday period commences from the date the Commission receives the SRO's prefiling. The prefiling requirement was designed to serve as an opportunity for Commission staff to ``discuss with the SRO whether there exists an adequate basis upon which the proposed rule change may properly qualify'' for immediate effectiveness under Rule 19b4(f)(6), and allows the SRO to ``elicit guidance from Commission staff to help the SRO identify those aspects of a proposed rule change that the Commission deems important'' in order to ``help the SRO articulate in its subsequent filing the purpose and effects of the proposed rule change, which in turn should further facilitate and expedite the filing process.'' Securities Exchange Act Release No. 34140 (June 1, 1994), 59 FR 29393, 29395 (June 7, 1994) (S71794) (``NonControversial Rule Proposing Release''). The Commission also notes that it has enhanced its electronic system through which SROs file proposed rule changes to allow the electronic submission of prefilings.

As with a proposed rule change filed pursuant to section 19(b)(2) of the Exchange Act, the Commission publishes notice in the Federal Register of a proposed rule change designated for immediate effectiveness under section 19(b)(3)(A).\32\ An immediately effective filing becomes operative upon filing with the Commission, except for a proposal submitted pursuant to Rule 19b4(f)(6), which becomes operative 30 days after the date of filing with the Commission or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest.\33\
\32\ An SRO must designate the basis for immediate effectiveness of the proposed rule change in Item 7 of Form 19b4. See Item 7 of Form 19b4 (``Basis for Summary Effectiveness Pursuant to Section 19(b)(3)(A) or for Accelerated Effectiveness Pursuant to Section 19(b)(2) or Section 19(b)(7)(D)'').
\33\ With respect to amendments to filings designated for immediate effectiveness pursuant to Rule 19b4(f)(6), the Commission has stated that ``any substantive amendment would trigger a new 30 day period, assuming the changes do not render the filing ineligible for this category.'' NonControversial Rule Adopting Release, supra note 8, 59 FR at 66695. The Commission staff, however, has ``discretion to accept editorial changes without triggering a new 30day period.'' Id. Such proposals should not require extensive amendments, since ``[a] filing requiring further substantive amendments may indicate that it is not appropriate for the expedited treatment afforded by the noncontroversial category.'' Id.

Further, the Exchange Act provides that at any time within 60 days of the date of filing of a proposed rule change designated for immediate effectiveness under section 19(b)(3)(A) of the Exchange Act and Rule 19b4(f) thereunder, the Commission summarily may abrogate the proposed rule change and require that the SRO refile the proposal under section 19(b)(2) of the Exchange Act ``if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of [the Exchange Act].'' \34\
\34\ 15 U.S.C. 78s(b)(3)(C).

III. Interpretive Guidance on the Rule Filing Process

The Commission today takes several actions, discussed in greater detail below, intended to facilitate more expeditious handling of proposed rule changes submitted by SROs. The Commission is providing interpretive guidance regarding the range of proposed changes to exchange trading rules that qualify for immediate effectiveness pursuant to Exchange Act Rule 19b4(f)(6) as not significantly affecting the protection of investors or the public interest and not imposing any significant burden on competition.\35\ The Commission anticipates that the guidance will result in exchanges filing a broader range of proposed changes to trading rules for immediate effectiveness under Rule 19b4(f)(6).
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Additionally, the Commission is providing guidance on proposed rule changes relating to an SRO's minor rule violation plan (``MRVP'') and ``copycat'' filings relating to SRO rules other than trading rules. The guidance provided herein as it relates to proposed changes to trading rules is directed at SROs that operate trading systems (i.e., the national securities exchanges). The additional guidance is applicable to all SROs, including exchanges, national securities associations, clearing agencies, and the MSRB.

\35\ See Rule 19b4(f)(6), 17 CFR 240.19b4(f)(6).

Further, as discussed in section V below, the Commission is adopting an amendment to Rule 200.303(a)(12) relating to the delegation of authority to the Director of the Division of Trading and Markets regarding the publication of proposed rule changes.\36\ Amended Rule 200.303(a)(12) applies with regard to all SRO rule filings. \36\ To assist the Commission in processing proposed rule changes expeditiously, the Commission emphasizes the obligation of each SRO to prepare proposed rule changes that are clear and complete. See supra note 22 and accompanying text. The Commission encourages SROs to devote sufficient resources to the rule filing process to assure quality work product to enable the Commission to evaluate efficiently whether the proposed rule change is consistent with the Exchange Act and applicable rules and regulations thereunder as well as the SRO's own rules.
A. Interpretive Guidance on Immediately Effective Proposed Rule Changes

The national securities exchanges' need to implement quickly new trading rules has become increasingly critical, particularly given the evolving role of securities exchanges, innovations in U.S. and cross border trading, and the increasingly competitive financial marketplace. Specifically, the Commission recognizes that the national securities exchanges registered under section 6(a) of the Exchange Act \37\ face increased competitive pressures from entities that trade the same or similar financial instrumentssuch as foreign exchanges, futures exchanges, ECNs, and ATSs. These competitors can change their trading rules or trade new products with greater ease, and without filing them with the Commission.

\37\ 15 U.S.C. 78f(a).

Accordingly, to inform exchanges' understanding of the range of exchange trading rules eligible for immediate effectiveness and to encourage exchanges to consider filing a broader range of proposed changes to trading rules that do not ``significantly affect the protection of investors or the public interest'' \38\ or do not ``impose any significant burden on competition,'' \39\ and thus qualify for immediate effectiveness under Rule 19b4(f)(6), the Commission is providing the interpretive guidance set forth in this release. \38\ 17 CFR 240.19b4(f)(6)(i).
\39\ 17 CFR 240.19b4(f)(6)(ii).
1. Previous Commission Guidance on Immediately Effective Proposals

As discussed above, Rule 19b4(f)(6) permits a proposed rule change to become immediately effective if, among other things, it is properly designated by an SRO as effecting a change that does not significantly affect the protection of investors or the public interest, and does not impose any significant burden on competition. Further, an immediately effective rule pursuant to Rule 19b4(f)(6), by its terms, may not become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, provided that the SRO has given the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission.

When adding paragraph (f)(6) to Rule 19b4 in 1994, the Commission referred to it as the ``noncontroversial category'' and noted that it was intended to accommodate proposed rule changes that were generally ``less likely to engender adverse comments or require the degree of review attendant with more controversial filings.'' \40\ Accordingly, the Commission contemplated that proposals eligible for filing under paragraph (f)(6) of Rule 19b4 would generally be ``inherently simple and concise'' and ``otherwise require little in the way of extended review or analysis by the Commission.'' \41\
\40\ NonControversial Rule Adopting Release, supra note 8, 59 FR at 66696.
\41\ Id. at 66695.
2. Interpretation of Rule 19b4(f)(6) for Rule Proposals Involving Exchange Trading Rules

The rule filing process, by which national securities exchanges are required to file their proposed rule changes with the Commission, currently allows the exchanges to implement many of their proposed rule changes relating to trading rules on an expedited basis. The Commission believes that more rule filings pertaining to the operation of an SRO's trading systems qualify for immediate effectiveness than are currently filed as such. A number of proposed rule changes that could qualify for immediate effectiveness under section 19(b)(3)(A) of the Exchange Act are filed, instead, ``regular way'' under section 19(b)(2), thus requiring the Commission to issue a notice and an approval order.\42\ \42\ The Commission understands, however, that there may be a variety of reasons why an SRO may file a proposed rule change under Section 19(b)(2), even though the rule change would have been appropriately filed as an immediately effective rule filing.

The Commission believes that a proposed trading rule change appropriately may be filed as an immediately effective rule so long as each policy issue raised by the proposed trading rule (i) has been considered previously by the Commission when the Commission approved another exchange's trading rule (that was subject to notice and comment) pursuant to Section 19(b)(2) of the Exchange Act, and (ii) the rule change resolves such policy issue in a manner consistent with such prior approval. The Commission believes that filing such proposed rule changes for immediate effectiveness not only will reduce the time before which an exchange could implement its new rule or modify an existing one, but also will eliminate the need for the Commission to issue both a notice and an approval order for each such filing.

The Commission notes that certain types of proposals remain ineligible for immediate effectiveness under Rule 19b4(f)(6). For example, proposals that introduce potentially anticompetitive or unfairly discriminatory aspects to an SRO's operation, or otherwise conflict with stated Commission policy, would not be eligible for immediate effectiveness since they would not meet the standard of Rule 19b4(f)(6) and the interpretation. Similarly, proposals that would substantially alter an exchange's market structure would continue to be ineligible for immediate effectiveness.
(a) Examples of Trading Rules Eligible for Immediate Effectiveness

Below is a partial list of the types of trading rules that the Commission believes are appropriate for filing as immediately effective rule changes under this interpretation. The Commission emphasizes that this is a partialnot exhaustivelist, designed to assist exchanges in determining the types of proposed trading rule changes that are appropriately filed as immediately effective.