New Requirement for the Reporting of Consolidated Short Interest Positions to the Intermarket Surveillance Group (ISG)

ACTION REQUIRED

Intermarket Surveillance Group

Executive Summary

This Notice to Members advises member firms that, effective September 2007, they are required to increase the frequency of short interest reporting from monthly to twice a month.¹ Attachment A outlines the revised Short Interest Reporting Schedule for September 2007 through December 2007. Additionally, the short interest reporting rules of certain ISG self-regulatory organizations (SROs) are included as Attachment B.

This Notice was prepared by the following SROs acting jointly as members of the ISG:

Questions/Further Information

Questions concerning short interest reporting requirements may be directed to any of the following SRO staff:

Technical or system questions should be directed to:

ISG Regulatory Memorandum, ISG 2007-01

On March 6, 2007, the Securities and Exchange Commission (SEC) approved rule changes by the Amex, NASD and NYSE to require members and member organizations to increase the frequency of short interest reporting from monthly to twice a month.² The amended short interest reporting requirements become effective 180 days after SEC approval to give members and member organizations adequate time to make any changes necessary to comply with the new requirements. In addition to the rule changes at the Amex, NASD and NYSE, the other U.S. securities marketplace members of the ISG are also revising their short interest reporting requirements to correspond to the twice-a-month reporting cycle. Therefore, beginning in September 2007, all ISG SROs will require members and member organizations to submit short interest information twice a month.

The Mid-Month Short Interest Report will continue to be based on short positions³ held by members on the settlement date of the 15th of each month. If the 15th falls on a weekend or another non-settlement date, the designated settlement date will be the previous business day on which transactions settled. The End-of—Month Short Interest Report will be based on short positions held on the last business day of the month on which transactions settle.

All members and member organizations of the ISG SROs will continue to be required to report short positions in all securities they carry, irrespective of where the securities are listed. It is not expected that the current reporting processes or reporting systems offered by the ISG SROs will change other than having to report twice a month.⁴

¹See Securities Exchange Act Release No. 55406 (March 6, 2007), 72 FR 11071 (March 12, 2007) (order approving SR-NASD-2006-131, SR-NYSE-2006-111, SR-Amex-2007-005).

² Currently, the Amex requires members to report End-of-Month Short Interest for "ETF type products."

³ Short positions to be reported are those resulting from short sales as the term is defined in SEC Rule 200 of Regulation SHO, subject to certain limited exceptions.

⁴ In connection with the implementation of the changes to NASDAQ symbology, certain of the ISG SROs may have changes to their reporting processes or systems.

ATTACHMENT A

September through December 2007—Short Interest Reporting Schedule

All Times: Eastern Time

ATTACHMENT B

Short Interest Reporting Rules

Amex Rule:

30A Periodic Reports—Short Positions

Every member organization shall submit, as required by the Exchange, periodic reports with respect to short positions in securities.

Commentary

For the purposes of this report, the term "customer" means any account other than the proprietary account of the reporting member organization.

"Short" positions to be reported are those resulting from "short sales" as that term is defined in Rule 200 of SEC Regulation SHO, but excluding positions resulting from sales specified in Securities Exchange Act Rule 10a-1(e) (1), (6), (7), (8) or (10). Also to be excluded are "short" positions carried for other members and member organizations reporting for themselves.

Only one report should be made for each stock, warrant or other security treated as an equity in which there is a short position. If more than one "account" has a short position in the same stock, warrant or other security treated as an equity, the combined aggregate should be reported.

NOTE: A member organization which does not carry customers' margin accounts and does not clear its own transactions may obtain an exemption from reporting by notifying the Exchange in writing.

Adopted. March 6, 2007 (Amex-2007-05).

CBOE Rule:

15.1. Maintenance, Retention and Furnishing of Books, Records and Other Information

Each member shall make, keep current and preserve such books and records as the Exchange may prescribe and as may be prescribed by the Securities Exchange Act of 1934 and the Rules and Regulations thereunder as though such member were a broker or dealer registered pursuant to Section 15 of such Act. No member shall refuse to make available to the Exchange such books, records or other information as may be called for under the Rules or as may be requested in connection with an investigation by the Exchange.

Interpretations and Policies:

NASD Rule:

3360. Short-Interest Reporting

Amended by SR-NASD-2005-087 eff. Aug. 1, 2006.
Amended by SR-NASD-2005-112 eff. July 3, 2006.
Amended by SR-NASD-2005-001 eff. Jan. 7, 2005.
Amended by SR-NASD-2002-178 eff. Dec. 16, 2002.
Amended by SR-NASD-94-67 eff. May 1, 1995.
Amended eff. Aug. 31, 1987.
Adopted by SR-NASD-85-34 eff. Jan. 20, 1986.

Selected Notices to Members: 85-77, 85-87, 86-4, 86-15, 86-61, 87-15, 95-8, 03-08.

NASDAQ Rule:

3360. Short-Interest Reporting

Amended by SR-NASDAQ-2006-018 eff. July 25, 2006.
Adopted by SEC Release 34-53128 (Jan. 13, 2006).

NYSE Rule

421. Periodic Reports

Member organizations shall submit, as required by the Exchange, periodic reports with respect to

Amended April 4, 1968.
Amended October 7, 1982.
Amended March 6, 2007 (NYSE-2006-111).

Supplementary Material:

.10 Short positions.—Member organizations for which the Exchange is the designated examining authority are required to report "short" positions, including odd lots, in each stock or warrant listed on the Exchange, and in each other stock or warrant not listed on the Exchange which is not otherwise reported to another United States securities exchange or securities association, using such automated format and methods as prescribed by the Exchange. Such reports must include customer and proprietary positions and must be made at such times and covering such time period as may be designated by the Exchange.

Member organizations for which the Exchange is not the designated examining authority must report "short" positions to the self-regulatory organization which is its designated examining authority ("DEA") if such DEA has a requirement for such reports. If the DEA does not have such a reporting requirement, then such member organization must comply with the provisions of Rule 421.

The term "designated examining authority" means the self-regulatory organization which has been assigned responsibility for examining a member organization for compliance with applicable financial responsibility rules. (See Rule 17d-1 under the Securities Exchange Act of 1934 (the "Exchange Act").)

"Short" positions to be reported are those resulting from "short" sales as defined in Rule 200 of the Securities and Exchange Commission's Regulation SHO, but excluding positions resulting from sales specified in clauses (1), (6), (7), (8), and (10) of paragraph (e) of Rule 10a-1 under the Exchange Act. Also to be excluded are "short" positions carried for other member organizations reporting for themselves.

Only one report should be made for each stock or warrant in which there is a short position. If more than one "account" has a short position in the same stock or warrant, the combined aggregate should be reported.

NOTE: A member organization which does not carry customers' margin accounts and does not clear its own transactions may obtain an exemption from reporting by notifying the Exchange in writing.

Amended March 30, 1993.
Amended March 6, 2007 (NYSE-2006-111).