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April 1, 2001

Should the SROs Do More?

By Editorial Staff

The SEC wants self-regulatory organi zations to implement most trading rule changes, a move that drew mixed reactions from some industry groups.

"We commend the SEC for addressing this important issue," said New York Stock Exchange spokesman Ray Pellecchia. He declined further comment because the NYSE is drafting a comment letter on the proposal.

"We are preparing a comment letter opposing this," said Margaret Draper, spokeswoman for the Securities Industry Association, in Washington, D.C. She said SIA is concerned that condensing the SEC's SRO rule change approval process could have unforeseen consequences, and could leave firms short of time to prepare their systems for such changes.

Move Fast

Release No. 34-43860 (17 CFR Parts 240 and 249), Proposed Rule Changes of Self-Regulatory Organizations, would allow the SEC "to issue a release relating to the [SRO's] proposed rule change within 10 business days of receipt (or within such longer period as to which the SRO consents in writing) and allow the majority of trading rules to be effective upon filing."

"The amendments are designed to expedite the review of SRO rules, and to allow SROs to more quickly introduce changes to their markets," the SEC said.

Leo McBlain, chairman of the Financial Information Forum in New York City, welcomed the SEC proposal.

The FIF has been helping the regulatory unit of the National Association of Securities Dealers in updating its Order Audit Trail System, or OATS, to conform with rules that require broker dealers to file reports nightly, he said. Under the current regime, NASD-R must apply to the SEC for every modification it makes to streamline OATS."That produces a lot of delays," McBlain said. The SEC's proposal could make NASD-R's efforts move much faster, he added.

NASD-R declined comment on the SEC proposal.

McBlain said that the SEC proposal could also help U.S. exchanges maintain a competitive advantage globally. Most foreign exchanges are not subject to the detailed oversight demanded by the SEC, he said. Big international companies sometimes balk at listing on U.S. exchanges due to the cumbersome rulemaking and information disclosure processes, he said.