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SEC Publishes Regulatory Actions to Streamline SRO Rule Filing Process


Washington, D.C., July 3, 2008 — The Securities and Exchange Commission today published a final rule and new interpretive guidance to improve the rulemaking process for exchanges and other self-regulatory organizations (SROs) that operate under SEC oversight.

The Commission voted unanimously on June 25, 2008, to approve the final rule and issue the guidance to help increase the competitiveness of U.S. markets, the speed with which new products and services can be made available to investors, and the effectiveness of measures designed to protect investors.

Over the past decade, major securities markets have transformed themselves from member-owned quasi-utilities into shareholder-owned, for-profit, multi-national businesses, and technology has revolutionized securities trading. Trades are now measured in milliseconds, and competitive decision making in the marketplace is urgent and immediate. This era of high-tech, global, and competitive exchanges has put an even greater premium on the SEC reviewing the rule proposals of SROs in a timely manner.

“Exchanges are competing with one another to provide more products to more investors more efficiently than ever before,” said SEC Chairman Christopher Cox. “But exchanges today also need to be able to change their rules quickly to respond to investors’ needs in this competitive environment. These changes in the SEC’s internal procedures should help strengthen the protection of investors who reap the benefits of healthier and more competitive markets.”

Under the Securities Exchange Act of 1934, when a proposed rule change is submitted by an SRO for Commission review, the Commission is required to approve it or institute proceedings to disapprove it within 35 days of its publication. This 35-day deadline can be extended for up to 90 days in certain cases.

To address concerns from market participants and others about rule-processing delays, the Commission has proposed to amend its internal rules of procedure to require that any proposed rule change filed by an SRO for review be published within 15 business days. In the rare instance when a rule change is unusually complex or raised novel issues, the Director of the Division of Trading and Markets would be able to make exceptions to this 15-day requirement.

The Commission also is issuing new interpretive guidance to elaborate on the Commission’s views regarding proposed rule changes that may properly be filed for immediate effectiveness, and specifically, those proposed rule changes filed pursuant to Exchange Act Rule 19b-4(f)(6), under which “non-controversial” rule changes may be filed.

First, the guidance would address the proposed changes to rules governing exchange trading systems that could be filed for immediate effectiveness. If these changes implicated any policy issues, they would have to be addressed consistently with how the Commission has dealt with them in the past. The guidance provides many helpful examples in this regard.

Additional changes that also could be filed for immediate effectiveness would include:

  • Those relating to an SRO’s minor rule violation plan.
  • So-called “copycat” rule filings relating to proposed rule changes other than trading rules.

The guidance and rules will be effective upon their publication in the Federal Register.

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The full text of the final rule and the new interpretive guidance has been posted to the SEC Web site.



Modified: 07/03/2008