[Federal Register Volume 75, Number 153 (Tuesday, August 10, 2010)]
[Notices]
[Pages 48388-48390]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19605]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62628; File No. SR-Phlx-2010-107]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating
to Making Permanent the Sponsored Access Pilot Program
August 3, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given
that on July 28, 2010, NASDAQ OMX PHLX, Inc. (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to make permanent its sponsored access rule,
Rule 1094. The current pilot expires on September 15, 2010.
The text of the proposed rule change is available on the Exchange's
Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings,
at the principal office of the Exchange, and at the Commission's Public
Reference Room.
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 Exchange 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 Exchange 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
The purpose of the proposed rule change is to attract additional
business by making permanent its sponsored access rule, which is
similar to that of other exchanges. Since the inception of the rule as
a pilot, many member organizations have now availed themselves of the
program. The Exchange believes that making the program permanent should
help attract even more users, especially because other exchanges'
similar rules are not pilot programs.
A Sponsored Participant is a non-member of the Exchange, such as an
institutional investor, that gains access to the Exchange and trades
under a Sponsoring Member's execution and clearing identity pursuant to
a sponsorship arrangement between such non-member and a member
organization. Specifically, the Exchange proposes to permit Sponsored
Participants to be sponsored by
[[Page 48389]]
Sponsoring Member Organizations, and thereby access the Exchange,
subject to certain requirements. These requirements are intended to
confirm that the Sponsored Participant is required to and had
procedures in place to comply with Exchange rules, and that the
Sponsoring Member Organization takes responsibility for the Sponsored
Participant's activity on the Exchange.
First, the Sponsored Participant and its Sponsoring Member
Organization must have entered into and maintained an Access Agreement
with the Exchange. The Sponsoring Member Organization must designate
the Sponsored Participant by name in an addendum to the Access
Agreement.
Second, there must be a Sponsored Participant Agreement between the
Sponsoring Member Organization and the Sponsored Participant that
contains the following sponsorship provisions, enumerated in full in
Rule 1094(b)(ii):
(i) The orders of the Sponsored Participant are binding in all
respects on the Sponsoring Member Organization;
(ii) The Sponsoring Member Organization is responsible for the
actions of the Sponsored Participant;
(iii) In addition to the Sponsoring Member Organization being
required to comply with the Exchange Certificate of Incorporation, By-
laws, Rules and procedures of the Exchange, the Sponsored Participant
shall do so as if such Sponsored Participant were an Exchange member
organization;
(iv) The Sponsored Participant shall maintain, keep current and
provide to the Sponsoring Member Organization a list of individuals
authorized to obtain access to the Exchange on behalf of the Sponsored
Participant;
(v) The Sponsored Participant shall familiarize its authorized
individuals with all of the Sponsored Participant's obligations under
this Rule and will assure that they receive appropriate training prior
to any use or access to the Exchange;
(vi) The Sponsored Participant may not permit anyone other than
authorized individuals to use or obtain access to the Exchange; \3\
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\3\ If the Exchange determines that an authorized individual has
caused a Member Organization to violate the Exchange's Rules, the
Exchange could direct the Member Organization to suspend or withdraw
the person's status as an authorized individual.
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(vii) The Sponsored Participant shall take reasonable security
precautions to prevent unauthorized use or access to the Exchange,
including unauthorized entry of information into the Exchange, and
agrees that it is responsible for any and all orders, trades and other
messages and instructions entered, transmitted or received under
identifiers, passwords and security codes of authorized individuals,
and for the trading and other consequences thereof;
(viii) The Sponsored Participant acknowledges its responsibility to
establish adequate procedures and controls that permit it to
effectively monitor its employees', agents' and Participants' use and
access to the Exchange for compliance with the terms of this agreement;
(ix) The Sponsored Participant shall pay when due all amounts, if
any, payable to Sponsoring Member Organization, the Exchange, or any
other third parties that arise from the Sponsored Participant's access
to and use of the Exchange. Such amounts include, but are not limited
to applicable exchange and regulatory fees.
Third, the Sponsoring Member Organization must provide the Exchange
with a Sponsored Participant Addendum to its Access Agreement
acknowledging its responsibility for the orders, executions and actions
of its Sponsored Participant at issue.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \4\ in general, and furthers the objectives of Section
6(b)(5) of the Act \5\ in particular, in that it is designed to promote
just and equitable principles of trade, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general to protect investors and the public interest by
helping market participants seeking access to a marketplace. Given that
it is substantially similar to the rules of several other exchanges and
has been in effect for several prior pilot periods,\6\ the proposal to
make permanent this pilot program does not appear to raise any novel
regulatory issues.\7\ Because the sponsored access rule has been relied
upon by many member organizations, the Exchange believes that the
changes proposed herein should serve to help market participants
seeking access to its marketplace.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
\6\ See Securities Exchange Release Nos. 59362 (February 5,
2009), 74 FR 6931 (February 11, 2009) (SR-Phlx-2009-10); 60456
(August 7, 2009), 74 FR 40862 (August 13, 2009) (SR-Phlx-2009-63);
60942 (November 4, 2009), 74 FR 58350 (November 12, 2009) (SR-Phlx-
2009-93); 61372 (January 15, 2010), 75 FR 4132 (January 26, 2010)
(SR-Phlx-2010-04); and 61776 (March 24, 2010), 75 FR 16219 (March
31, 2010) (SR-Phlx-2010-44).
\7\ The Exchange understands that the Commission has proposed
for comment new Rule 15c3-5 under the Exchange Act that would govern
access to trading venues. Securities Exchange Act Release No. 61379
(January 19, 2010), 75 FR 4007 (January 26, 2010) (File No. S7-03-
10). Of course, once such a rule becomes effective, the Exchange
would comply with it and modify its rules accordingly. In the
interim, the Exchange believes that making its Rule 1094 permanent
sends a message to its users that the Exchange's sponsored access
program is thriving, especially because other exchanges' similar
programs are not pilot programs.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) \9\
thereunder.
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change 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 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
[[Page 48390]]
Send an e-mail to [email protected]. Please include
File Number SR-Phlx-2010-107 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2010-107. 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 the filing also will be
available for inspection and copying at the principal office of the
Exchange. 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
available publicly.
All submissions should refer to File Number SR-Phlx-2010-107 and
should be submitted on or before August 31, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19605 Filed 8-9-10; 8:45 am]
BILLING CODE 8010-01-P