[Federal Register Volume 75, Number 209 (Friday, October 29, 2010)]
[Notices]
[Pages 66820-66822]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27339]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63171; File No. SR-BX-2010-071]
Self-Regulatory Organizations; NASDAQ OMX BX; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend BX Rules
2270 and 2910 To Reflect Changes to Corresponding FINRA Rule 2261
October 25, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 20, 2010, NASDAQ OMX BX, Inc. (the ``Exchange'' or ``BX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared primarily by the Exchange. The Exchange has
designated the proposed rule change as constituting a non-controversial
rule change under Rule 19b-4(f)(6) under the Act,\3\ which renders the
proposal effective upon filing with the Commission. 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.
\3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing this proposed rule change to amend BX Rules
2270 and 2910 to reflect recent changes to a corresponding rule of the
Financial Industry Regulatory Authority (``FINRA''), which will result
in consolidating BX Rules 2270 and 2910 into BX Rule 2261. The Exchange
proposes to implement the proposed rule change immediately. The text of
the proposed rule change is below. Proposed new language is underlined;
proposed deletions are in [brackets].
* * * * *
2261. Disclosure of Financial Condition
Exchange Members shall comply with FINRA Rule 2261 as if such Rule
were part of the Rules of the Exchange.
* * * * *
[2270. Disclosure of Financial Condition to Customers]
Exchange Members shall comply with NASD Rule 2270 as if such Rule
were part of the Rules of the Exchange.
FINRA is in the process of consolidating certain NASD rules into a
new FINRA rulebook. If the provisions of NASD Rule 2270 are transferred
into the FINRA rulebook, then Equity Rule 2270 shall be construed to
require Exchange members to comply with the FINRA rule corresponding to
NASD Rule 2270 (regardless of whether such rule is renumbered or
amended) as if such rule were part of the Rules of the Exchange.]
* * * * *
[2910. Disclosure of Financial Condition to Other Members]
Any Exchange member who is a party to an open transaction or who
has on deposit cash or securities of another member shall furnish upon
written request of the other member a statement of its financial
condition as disclosed in its most recently prepared balance sheet.]
* * * * *
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.
[[Page 66821]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Many of Exchange's rules are based on rules of FINRA (formerly the
National Association of Securities Dealers (``NASD'')). During 2008,
FINRA embarked on an extended process of moving rules formerly
designated as ``NASD Rules'' into a consolidated FINRA rulebook. In
most cases, FINRA has renumbered these rules, and in some cases has
substantively amended them. Accordingly, the Exchange initiated a
process of modifying its rulebook to ensure that the Exchange rules
corresponding to FINRA/NASD rules continue to mirror them as closely as
practicable. The Exchange proposes to update its rules to reflect
changes BX Rules 2270 and 2910 which corresponds to FINRA Rule 2261.
BX Rule 2270 (Disclosure of Financial Condition to Customers) and
BX Rule 2910 (Disclosure of Financial Condition to Other Members)
formerly corresponded to NASD Rule 2270 (Disclosure of Financial
Condition to Customers) and NASD Rule 2910 (Disclosure of Financial
Condition to Other Members). In SR-FINRA-2009-081,\4\ FINRA re-
designated NASD Rules 2270 and 2910 as FINRA Rule 2261 and made
substantive amendments to strengthen and simplify the rules.
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\4\ Securities Exchange Act Release No. 61540 (February 18,
2010), 75 FR 8771 (February 25, 2010) (SR-FINRA-2009-081).
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More specifically, the current BX Rule 2270, which incorporates
NASD Rule 2270 by reference, requires that the members make information
relative to a member's financial condition, as disclosed in its most
recent balance sheet, available for inspection by any bona fide regular
customer upon request. In FINRA SR-2009-081, FINRA provided members the
option of delivering their balance sheet, in paper or electronic form,
to customers who request it. Additionally, if the delivery is
electronic, the requesting customer must provide consent to receive the
balance sheet in electronic form to ensure that such information is
accessible to the customer.
This proposed filing also addresses BX Rule 2910, which compares to
the former NASD Rule 2910. BX Rule 2910 requires that any member that
is a party to an open transaction or who has on deposit cash or
securities of another member to furnish, upon the written request of
the other member, a statement of its financial condition as disclosed
in its most recently prepared balance sheet. In SR-FINRA-2009-081,\5\
FINRA amended NASD Rule 2910 and consolidated it within FINRA Rule 2261
to require that members provide to other members the balance sheet that
was prepared in accordance with the member's usual practice or as
required by state or federal securities laws or any corresponding rule
or regulation. Also, FINRA amended the provision to require that
members be permitted to provide their balance sheet to other members in
paper or electronic form; however, this does not require obtaining
consent of the other members for delivery.
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\5\ See supra note 4.
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The Exchange believes that BX Rule 2270 and 2910 should be
consolidated and amended to reflect the provisions in the new FINRA
2261. For clarification, this results in deleting BX Rules 2270 and
2910. This will allow customers and other members to continue to have
access to a copy of the member's most recent balance sheet at any time
upon request while simplifying the provisions. The Exchange is adopting
the new FINRA rule in full by incorporating by reference FINRA Rule
2261 into the proposed BX Rule 2261.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\6\ in general, and with
Sections 6(b)(5) of the Act,\7\ in particular, in that the proposal is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, 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 proposed
changes will conform BX Rules 2270 and 2910 to recent changes made to
corresponding FINRA Rule 2261 to promote application of consistent
regulatory standards.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(5).
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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
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) \9\ thereunder in that
it effects a change that: (i) Does not significantly affect the
protection of investors or the public interest; (ii) does not impose
any significant burden on competition; and (iii) by its terms, does not
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest.
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6). In addition, BX has given 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 on which the
Exchange filed the proposed rule change.
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A proposed rule change filed under Rule 19b-4(f)(6) normally may
not become operative prior to 30 days after the date of filing.\10\
However, Rule 19b-4(f)(6) \11\ permits the Commission to designate a
shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has requested that the
Commission waive the 30-day operative delay so that the proposal may
become operative upon filing. The Exchange notes that the changes are
identical to changes made by FINRA approved by the Commission, because
the Exchange is incorporating those changes.\12\ BX proposes to
incorporate the FINRA rule by reference. For these reasons, the
Commission believes it is consistent with the protection of investors
and the public interest to waive the 30-day operative delay, and hereby
grants such waiver.\13\
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\10\ 17 CFR 240.19b-4(f)(6)(iii).
\11\ Id.
\12\ See supra note 4.
\13\ For the purposes only of waiving the operative date of this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of such 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
[[Page 66822]]
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, as amended, 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-BX-2010-071 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-BX-2010-071. 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 website 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-BX-2010-071
and should be submitted on or before November 19, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-27339 Filed 10-28-10; 8:45 am]
BILLING CODE 8011-01-P