[Federal Register Volume 75, Number 204 (Friday, October 22, 2010)]
[Notices]
[Pages 65392-65393]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-26676]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63121; File No. SR-Phlx-2010-119]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Order
Approving Proposed Rule Change To Amend Exchange Rule 652 (``Limitation
of Exchange Liability and Reimbursement of Certain Expenses'') To
Require Member Organizations on the Exchange's Trading Floor To Procure
and Maintain Liability Insurance
October 18, 2010.
I. Introduction
On September 1, 2010, NASDAQ OMX PHLX, Inc. (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule
[[Page 65393]]
19b-4 thereunder,\2\ a proposed rule change to amend Exchange Rule 652
(``Limitation of Exchange Liability and Reimbursement of Certain
Expenses'') to require member organizations on the Exchange's trading
floor to procure and maintain liability insurance. The proposed rule
change was published for comment in the Federal Register on September
17, 2010.\3\ The Commission received no comments on the proposal. This
order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 62892 (September 10,
2010), 75 FR 57090.
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II. Description of the Proposal
The Exchange proposes to require that member organizations located
on the Exchange's trading floor procure and maintain liability
insurance by December 31, 2010. The insurance would provide defense and
indemnity coverage for the member organization, any person associated
with the member organization and the Exchange for any action or
proceeding brought, or claim made, to impose liability upon the member
organization, associated person or the Exchange which results from the
member organization's or associated person's conduct.
According to the Exchange, it does not intend this amendment to
provide relief associated with financial loss related to buying and
selling securities; the insurance coverage is intended to provide
coverage to the Exchange for its sole, concurrent, or contributory
negligence or other wrongdoing connected to a claim arising from the
member organization's or associated person's conduct. The member
organization would be required to maintain insurance with a limit that
is not less than $1,000,000 without erosion by defense costs. Each
member organization located on the trading floor would be required to
provide a certificate of insurance to be issued directly to the
Exchange demonstrating the insurance was procured and is maintained.
The Exchange also proposes to expand the language in Rule 652 to apply
the rule to individuals of the Exchange, specifically officers,
directors and employees. The Exchange believes that this change will
clarify that individuals serving as officers, directors or employees
are also the subject of Rule 652.
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the Act and the rules and regulations
thereunder applicable to a national securities exchange.\4\ In
particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\5\ which requires, among
other things, that the proposed rule change be 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. The
Commission believes that the proposed rule change is a reasonable means
of protecting the Exchange's financial resources that are normally used
to support the Exchange's surveillance and self-regulatory
responsibilities, rather than having this capital diverted to defending
litigation claims.
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\4\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\5\ 15 U.S.C. 78f(b)(5).
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The Commission believes that requiring member organizations to
obtain insurance coverage to protect the Exchange from claims resulting
from their own conduct is not an undue burden. Furthermore, the
Commission believes that the proposed rule change may conserve Exchange
capital resources, and will provide additional coverage for member
organizations since the member organizations are within the scope of
the required insurance's coverage.
Finally, the Commission believes that amending Exchange Rule 652 to
add officers, directors and employees in addition to the Exchange will
remove any ambiguity or confusion by explicitly stating that the word
``Exchange'' as used in Rule 652 includes such individuals.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
\6\ that the proposed rule change (SR-Phlx-2010-119) be, and it hereby
is, approved.
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\6\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-26676 Filed 10-21-10; 8:45 am]
BILLING CODE 8011-01-P