[Federal Register Volume 75, Number 159 (Wednesday, August 18, 2010)]
[Notices]
[Pages 51138-51140]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-20474]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62695; File No. SR-EDGX-2010-11]
Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
EDGX Rule 3.13
August 11, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on August 3, 2010, EDGX Exchange, Inc. (``EDGX'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. 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 amend EDGX Rule 3.13 to conform it with
FINRA Rule 5230 in order (i) for FINRA
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to effectively examine for the rule pursuant to a Rule 17d-2 agreement
that the Exchange has entered into with FINRA; and (ii) to modernize
its terms and clarify its scope. The text of the proposed rule change
is available on the Exchange's Web site at http://www.directedge.com,
on the Commission's Web site at http://www.sec.gov, 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 self-regulatory organization
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
EDGX Exchange, Inc. has entered into a Rule 17d-2 \3\ agreement
with FINRA pursuant to which FINRA surveils violations of rules in
common between FINRA and EDGX. This agreement covers common members of
EDGX and FINRA and allocates to FINRA regulatory responsibility, with
respect to common members, for the following: (i) Examination of common
members of EDGX and FINRA for compliance with Federal securities laws,
rules and regulations and rules of the Exchange that the Exchange has
certified as identical or substantially similar to FINRA rules; (ii)
investigation of common members of EDGX and FINRA for violations of
Federal securities laws, rules or regulations, or Exchange rules that
the Exchange has certified as identical or substantially identical to a
FINRA rule; and (iii) enforcement of compliance by common members with
the Federal securities laws, rules and regulations, and the rules of
EDGX that the Exchange has certified as identical or substantially
similar to FINRA rules.\4\
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\3\ 17 CFR 240.17d-2.
\4\ See Securities and Exchange Release No. 61698 (March 12,
2010), 75 FR 13151 (March 18, 2010) (approving File No. 10-196).
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EDGX Rule 3.13 is identical to NASD Rule 3330, which was
subsequently re-numbered and amended to be FINRA Rule 5230.\5\ FINRA,
however, recently incorporated additional exceptions to this rule in
order to ``modernize its terms and clarify its scope.'' \6\ After a
consideration of the merits of such rule change, including the benefits
of ensuring that Rule 3.13 would continue to be a common rule covered
under the Exchange's Rule 17d-2 agreement with FINRA, EDGX is proposing
to amend its Rule 3.13 to comport it with FINRA Rule 5230.
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\5\ See Securities and Exchange Release No. 60648 (September 10,
2009), 74 FR 47837 (September 17, 2009) (SR-FINRA-2009-048).
\6\ See Securities and Exchange Release No. 60648 (September 10,
2009), 74 FR 47837 (September 17, 2009) (SR-FINRA-2009-048).
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EDGX Rule 3.13 currently provides that no member may, ``directly or
indirectly, give, permit to be given, or offer to give, anything of
value to any person for the purpose of influencing or rewarding the
action of such person in connection with the publication or circulation
in any newspaper, investment service, or similar publication, of any
matter which has, or is intended to have, an effect upon the market
price of any security. * * * '' The rule includes an exception for any
matter that is ``clearly distinguishable as paid advertising.''
EDGX agrees with FINRA's reasoning for proposing changes to its
Rule 5230. Therefore, EDGX is proposing two changes to EDGX Rule 3.13
to modernize its terms and clarify its scope.\7\ First, the proposed
rule change updates the list of media to which the rule refers since
Rule 3.13 refers only to matters published or circulated in any
``newspaper, investment service, or similar publication.'' The proposed
rule change updates this language to include electronic and other types
of media, including magazines, Web sites, and television programs.
Second, the proposed rule change expands the exceptions in the rule
beyond paid advertising to also include compensation paid in connection
with research reports and communications published in reliance on
Section 17(b) of the Securities Act of 1933.\8\ EDGX is proposing these
changes to clarify that the prohibitions in the rule are not intended
to cover compensation paid for publications that are explicitly
permitted pursuant to other rules. For example, Rule 3.13 could be read
to prohibit a member from paying for a third-party research report if
the report affected the market price of a security. However, EDGX does
not believe that the rule should be read to prohibit compensation paid
in connection with the publication of information that is specifically
permitted pursuant to Section 17(b) of the Securities Act of 1933,
provided the required disclosures are made.
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\7\ The proposed rule changes also changes the title of the rule
to ``Payments Involving Publications that Influence the Market Price
of a Security.''
\8\ Section 17(b) of the Securities Act of 1933 provides that no
person may ``publish, give publicity to, or circulate any * * *
communication which, though not purporting to offer a security for
sale, describes such security for a consideration received or to be
received, directly or indirectly, from an issuer, underwriter, or
dealer, without fully disclosing the receipt, whether past or
prospective, of such consideration and the amount thereof.'' 15
U.S.C. 77q(b).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\9\ in general, and with
Section 6(b)(5) of the Act \10\ in particular, which requires, among
other things, that Exchange rules must be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, and, in general, to protect investors
and the public interest. EDGX believes that the proposed rule change
will clarify the scope of the rule as well as allow FINRA to be able to
examine for it under a Rule 17d-2 agreement since it will be identical
to FINRA Rule 5230, as proposed to be amended.
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not impose any burden on competition
that is 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
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\
Because the foregoing proposed rule change: (i) Does not significantly
affect the protection of investors or the public interest; (ii) does
not impose any significant burden on
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competition; and (iii) by its terms, does not become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, if consistent with the protection of
investors and the public interest, it has become effective pursuant to
Section 19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6)
thereunder.\14\
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\11\ 15 U.S.C. 78s(b)(3)(A)(iii).
\12\ 17 CFR 240.19b-4(f)(6).
\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the self-regulatory organization to submit to 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. 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
Send an e-mail to [email protected]. Please include
File Number SR-EDGX-2010-11 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-EDGX-2010-11. 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 Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such 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-EDGX-2010-11 and should be
submitted on or before September 8, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-20474 Filed 8-17-10; 8:45 am]
BILLING CODE 8010-01-P