[Federal Register Volume 75, Number 42 (Thursday, March 4, 2010)]
[Notices]
[Pages 9976-9981]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4456]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61589; File No. S7-966]
Program for Allocation of Regulatory Responsibilities Pursuant to
Rule 17d-2; Notice of Filing and Order Approving and Declaring
Effective an Amendment to the Plan for the Allocation of Regulatory
Responsibilities Among the BATS Exchange, Inc., the Chicago Board
Options Exchange, Incorporated, C2 Options Exchange, Incorporated, the
International Securities Exchange, LLC, Financial Industry Regulatory
Authority, Inc., the New York Stock Exchange LLC, NYSE Amex LLC, NYSE
Arca, Inc., The NASDAQ Stock Market LLC, NASDAQ OMX BX, Inc., and
NASDAQ OMX PHLX, Inc. Concerning Options-Related Sales Practice Matters
February 25, 2010.
Notice is hereby given that the Securities and Exchange Commission
(``Commission'') has issued an Order, pursuant to Section 17(d) of the
Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring
effective an amendment to the plan for allocating regulatory
responsibility filed pursuant to Rule 17d-2 of the Act,\2\ by the BATS
Exchange, Inc. (``BATS''), the Chicago Board Options Exchange,
Incorporated (``CBOE''), C2 Options Exchange, Incorporated (``C2''),
the International Securities Exchange, LLC (``ISE''), Financial
Industry Regulatory Authority, Inc. (``FINRA''), the New York Stock
Exchange LLC (``NYSE''), NYSE Amex LLC (``Amex''), NYSE Arca,
Inc.(``Arca''), The NASDAQ Stock Market LLC (``NASDAQ''), NASDAQ OMX
BX, Inc. (``BX''), and NASDAQ OMX PHLX, Inc. (``Phlx'') (collectively,
``SRO participants'').
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\1\ 15 U.S.C. 78q(d).
\2\ 17 CFR 240.17d-2.
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I. Introduction
Section 19(g)(1) of the Act,\3\ among other things, requires every
self-regulatory organization (``SRO'') registered as either a national
securities exchange or national securities association to examine for,
and enforce compliance by, its members and persons associated with its
members with the Act, the rules and regulations thereunder, and the
SRO's own rules, unless the SRO is relieved of this responsibility
pursuant to Section 17(d) \4\ or Section 19(g)(2) \5\ of the Act.
[[Page 9977]]
Without this relief, the statutory obligation of each individual SRO
could result in a pattern of multiple examinations of broker-dealers
that maintain memberships in more than one SRO (``common members'').
Such regulatory duplication would add unnecessary expenses for common
members and their SROs.
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\3\ 15 U.S.C. 78s(g)(1).
\4\ 15 U.S.C. 78q(d).
\5\ 15 U.S.C. 78s(g)(2).
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Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate
unnecessary multiple examinations and regulatory duplication.\7\ With
respect to a common member, Section 17(d)(1) authorizes the Commission,
by rule or order, to relieve an SRO of the responsibility to receive
regulatory reports, to examine for and enforce compliance with
applicable statutes, rules, and regulations, or to perform other
specified regulatory functions.
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\6\ 15 U.S.C. 78q(d)(1).
\7\ See Securities Act Amendments of 1975, Report of the Senate
Committee on Banking, Housing, and Urban Affairs to Accompany S.
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
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To implement Section 17(d)(1), the Commission adopted two rules:
Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the
Commission to name a single SRO as the designated examining authority
(``DEA'') to examine common members for compliance with the financial
responsibility requirements imposed by the Act, or by Commission or SRO
rules.\9\ When an SRO has been named as a common member's DEA, all
other SROs to which the common member belongs are relieved of the
responsibility to examine the firm for compliance with the applicable
financial responsibility rules. On its face, Rule 17d-1 deals only with
an SRO's obligations to enforce member compliance with financial
responsibility requirements. Rule 17d-1 does not relieve an SRO from
its obligation to examine a common member for compliance with its own
rules and provisions of the Federal securities laws governing matters
other than financial responsibility, including sales practices and
trading activities and practices.
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\8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
\9\ See Securities Exchange Act Release No. 12352 (April 20,
1976), 41 FR 18808 (May 7, 1976).
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To address regulatory duplication in these and other areas, the
Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits
SROs to propose joint plans for the allocation of regulatory
responsibilities with respect to their common members. Under paragraph
(c) of Rule 17d-2, the Commission may declare such a plan effective if,
after providing for notice and comment, it determines that the plan is
necessary or appropriate in the public interest and for the protection
of investors, to foster cooperation and coordination among the SROs, to
remove impediments to, and foster the development of, a national market
system and a national clearance and settlement system, and is in
conformity with the factors set forth in Section 17(d) of the Act.
Commission approval of a plan filed pursuant to Rule 17d-2 relieves an
SRO of those regulatory responsibilities allocated by the plan to
another SRO.
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\10\ See Securities Exchange Act Release No. 12935 (October 28,
1976), 41 FR 49091 (November 8, 1976).
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II. The Plan
On September 8, 1983, the Commission approved the SRO participants'
plan for allocating regulatory responsibilities pursuant to Rule 17d-
2.\11\ On May 23, 2000, the Commission approved an amendment to the
plan that added the ISE as a participant.\12\ On November 8, 2002, the
Commission approved another amendment that replaced the original plan
in its entirety and, among other things, allocated regulatory
responsibilities among all the participants in a more equitable
manner.\13\ On February 5, 2004, the parties submitted an amendment to
the plan, primarily to include the BSE, which was establishing a new
options trading facility to be known as the Boston Options Exchange
(``BOX''), as an SRO participant.\14\ On December 5, 2007, the parties
submitted an amendment to the plan to, among other things, provide that
the National Association of Securities Dealers (``NASD'') (n/k/a the
Financial Industry Regulatory Authority, Inc. or ``FINRA'') and NYSE
are Designated Options Examining Authorities under the plan.\15\ On
June 5, 2008, the parties submitted an amendment to the plan primarily
to remove the NYSE as a Designated Options Examining Authority, leaving
FINRA as the sole Designated Options Examining Authority for all common
members that are members of FINRA.\16\
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\11\ See Securities Exchange Act Release No. 20158 (September 8,
1983), 48 FR 41256 (September 14, 1983).
\12\ See Securities Exchange Act Release No. 42816 (May 23,
2000), 65 FR 34759 (May 31, 2000).
\13\ See Securities Exchange Act Release No. 46800 (November 8,
2002), 67 FR 69774 (November 19, 2002).
\14\ See Securities Exchange Act Release No. 49197 (February 5,
2004), 69 FR 7046 (February 12, 2004).
\15\ See Securities Exchange Act Release No. 55532 (March 26,
2007), 72 FR 15729 (April 2, 2007).
\16\ See Securities Exchange Act Release No. 57987 (June 18,
2008), 73 FR 36156 (June 25, 2008).
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The plan reduces regulatory duplication for a large number of firms
currently members of two or more of the SRO participants by allocating
regulatory responsibility for certain options-related sales practice
matters to one of the SRO participants. Generally, under the current
plan, the SRO participant responsible for conducting options-related
sales practice examinations of a firm, and investigating options-
related customer complaints and terminations for cause of associated
persons of that firm, is known as the firm's ``Designated Options
Examining Authority'' (``DOEA''). Pursuant to the current plan, any
other SRO of which the firm is a member is relieved of these
responsibilities during the period in which the firm is assigned to
another SRO acting as that firm's DOEA.
III. Proposed Amendment to the Plan
On February 9, 2010, the parties submitted a proposed amendment to
the plan. The primary purpose of the amendment is to add BATS Exchange,
Inc. and C2 Options Exchange, Incorporated as an SRO participant and to
reflect the name changes of the American Stock Exchange LLC to the NYSE
Amex LLC, the Boston Stock Exchanges, Inc., to the NASDAQ OMX BX, Inc.
and the Philadelphia Stock Exchange, Inc. to the NASDAQ OMX PHLX, Inc.
The amended agreement replaces the previous agreement in its entirety.
The text of the proposed amended 17d-2 plan is as follows (additions
are italicized; deletions are [bracketed]):
* * * * *
Agreement by and among [the American Stock Exchange, LLC, the Boston
Stock] BATS Exchange, Inc., the Chicago Board Options Exchange, [Inc.]
Incorporated, C2 Options Exchange, Incorporated, the International
Securities Exchange, LLC, Financial Industry Regulatory Authority,
Inc., the New York Stock Exchange[,] LLC, the NYSE Amex LLC, the NYSE
Arca, Inc., The NASDAQ Stock Market LLC, NASDAQ OMX BX, Inc. and the
[Philadelphia Stock Exchange] NASDAQ OMX PHLX, Inc. Pursuant to Rule
17d-2 under the Securities Exchange Act of 1934.
This agreement (``Agreement''), by and among [the American Stock
Exchange, LLC, the Boston Stock]BATS Exchange, Inc., the Chicago Board
Options Exchange, [Inc.]Incorporated, C2 Options Exchange,
Incorporated, the International Securities Exchange, LLC, Financial
Industry Regulatory Authority, Inc. (``FINRA''), The NASDAQ Stock
Market LLC (``NASDAQ''), NASDAQ OMX BX, Inc., the New York Stock
Exchange LLC (``NYSE''), the NYSE Amex LLC, the NYSE Arca, Inc., and
the [Philadelphia
[[Page 9978]]
Stock Exchange]NASDAQ OMX PHLX, Inc., hereinafter collectively referred
to as the Participants, is made this [27th]5th day of [December,
2008]February, 2010, pursuant to the provisions of Rule 17d-2 under the
Securities Exchange Act of 1934 (the ``Exchange Act''), which allows
for plans among self-regulatory organizations to allocate regulatory
responsibility. This Agreement shall be administered by a committee
known as the Options Self-Regulatory Council (the ``Council'').
This Agreement amends and restates the agreement entered into among
the Participants on [December 27, 2007]June 5, 2008, entitled
``Agreement by and among the American Stock Exchange, LLC, the Boston
Stock Exchange, Inc., the Chicago Board Options Exchange, [Inc.]
Incorporated, the International Securities Exchange, LLC, Financial
Industry Regulatory Authority, Inc., the New York Stock Exchange[,]
LLC, the NYSE Arca, Inc., the NASDAQ Stock Market LLC, and the
Philadelphia Stock Exchange, Inc., Pursuant to Rule 17d-2 under the
Securities Exchange Act of 1934.''
Whereas, the Participants are desirous of allocating regulatory
responsibilities with respect to broker-dealers, and persons associated
therewith, that are members \1\ of more than one Participant (the
``Common Members'') and conduct a public business for compliance with
Common Rules (as hereinafter defined) relating to the conduct by
broker-dealers of accounts for listed options, index warrants, currency
index warrants and currency warrants (collectively, ``Covered
Securities''); and
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\1\ In the case of [the Boston Stock Exchange]NASDAQ OMX BX,
Inc.[,] and NASDAQ members are those persons who are options
participants (as defined in the BOX and NASDAQ Options Market
Rules).
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Whereas, the Participants are desirous of executing a plan for this
purpose pursuant to the provisions of Rule 17d-2 and filing such plan
with the Securities and Exchange Commission (``SEC'' or the
``Commission'') for its approval;
Now, therefore, in consideration of the mutual covenants contained
hereafter, the Participants agree as follows:
I. As used herein the term Designated Options Examining Authority
(``DOEA'') shall mean: (1) FINRA insofar as it shall perform Regulatory
Responsibility (as hereinafter defined) for its broker-dealer members
that also are members of another Participant or (2) the Designated
Examination Authority (``DEA'') pursuant to SEC Rule 17d-1 under the
Securities Exchange Act (``Rule 17d-1'') for a broker-dealer that is a
member of a more than one Participant (but not a member of FINRA).
II. As used herein, the term ``Regulatory Responsibility'' shall
mean the examination and enforcement responsibilities relating to
compliance by Common Members with the rules of the applicable
Participant that are substantially similar to the rules of the other
Participants (the ``Common Rules''), insofar as they apply to the
conduct of accounts for Covered Securities. A list of the current
Common Rules of each Participant applicable to the conduct of accounts
for Covered Securities is attached hereto as Exhibit A. Each year
within 30 days of the anniversary date of the commencement of operation
of this Agreement, each Participant shall submit in writing to FINRA
and each DEA performing as a DOEA for any members of such Participant
any revisions to Exhibit A reflecting changes in the rules of the
Participant, and confirm that all other rules of the Participant listed
in Exhibit A continue to meet the definition of Common Rules as defined
in this Agreement. Within 30 days from the date that FINRA and each DEA
performing as a DOEA has received revisions and/or confirmation that no
change has been made to Exhibit A from all Participants, FINRA and each
DEA performing as a DOEA shall confirm in writing to each Participant
whether the rules listed in any updated Exhibit A are Common Rules as
defined in this Agreement. Notwithstanding anything herein to the
contrary, it is explicitly understood that the term ``Regulatory
Responsibility'' does not include, and each of the Participants shall
(unless allocated pursuant to Rule 17d-2 otherwise than under this
Agreement) retain full responsibility for, each of the following:
(a) Surveillance and enforcement with respect to trading activities
or practices involving its own marketplace, including without
limitation its rules relating to the rights and obligations of
specialists and other market makers;
(b) Registration pursuant to its applicable rules of associated
persons;
(c) Discharge of its duties and obligations as a DEA; and
(d) Evaluation of advertising, responsibility for which shall
remain with the Participant to which a Common Member submits same for
approval.
III. Apparent violations of another Participant's rules discovered
by a DOEA, but which rules are not within the scope of the discovering
DOEA's Regulatory Responsibility, shall be referred to the relevant
Participant for such action as the Participant to which such matter has
been referred deems appropriate. Notwithstanding the foregoing, nothing
contained herein shall preclude a DOEA in its discretion from
requesting that another Participant conduct an enforcement proceeding
on a matter for which the requesting DOEA has Regulatory
Responsibility. If such other Participants agree, the Regulatory
Responsibility in such case shall be deemed transferred to the
accepting Participant and confirmed in writing by the Participants
involved. Each Participant agrees, upon request, to make available
promptly all relevant files, records and/or witnesses necessary to
assist another Participant in an investigation or enforcement
proceeding.
IV. The Council shall be composed of one representative designated
by each of the Participants. Each Participant shall also designate one
or more persons as its alternate representative(s). In the absence of
the representative of a Participant, such alternate representative
shall have the same powers, duties and responsibilities as the
representative. Each Participant may, at any time, by notice to the
then Chair of the Council, replace its representative and/or its
alternate representative on such Council. A majority of the Council
shall constitute a quorum and, unless specifically otherwise required,
the affirmative vote of a majority of the Council members present (in
person, by telephone or by written consent) shall be necessary to
constitute action by the Council. The representative from FINRA shall
serve as Chair of the Council. All notices and other communications for
the Council shall be sent to it in care of the Chair or to each of the
representatives.
V. The Council shall determine the times and locations of Council
meetings, provided that the Chair, acting alone, may also call a
meeting of the Council in the event the Chair determines that there is
good cause to do so. To the extent reasonably possible, notice of any
meeting shall be given at least ten-business days prior thereto.
Notwithstanding anything herein to the contrary, representatives shall
always be given the option of participating in any meeting
telephonically at their own expense rather than in person.
VI. FINRA shall have Regulatory Responsibility for all Common
Members that are members of FINRA. For the purpose of fulfilling the
Participants' Regulatory Responsibilities for Common Members that are
not members of FINRA, the Participant that is the DEA shall serve as
the DOEA. All Participants shall promptly notify the DOEAs no later
than the next scheduled
[[Page 9979]]
meeting of any change in membership of Common Members. A DOEA may
request that a Common Member that is allocated to it be reallocated to
another DOEA by giving thirty days written notice thereof. The DOEAs in
their discretion may approve such request and reallocate such Common
Member to another DOEA.
VII. Each DOEA shall conduct an examination of each Common Member.
The Participants agree that, upon request, relevant information in
their respective files relative to a Common Member will be made
available to the applicable DOEA. At each meeting of the Council, each
DOEA shall be prepared to report on the status of its examination
program for the previous quarter and any period prior thereto that has
not previously been reported to the Council.
VIII. Each DOEA will promptly furnish a copy of the Examination
report, relating to Covered Securities, of any examination made
pursuant to the provisions of this Agreement to each other Participant
of which the Common Member examined is a member.
IX. Each DOEA's Regulatory Responsibility shall for each Common
Member allocated to it include investigations into terminations ``for
cause'' of associated persons relating to Covered Securities, unless
such termination is related solely to another Participant's market. In
the latter instance, that Participant to whose market the termination
for cause relates shall discharge Regulatory Responsibility with
respect to such termination for cause. In connection with a DOEA's
examination, investigation and/or enforcement proceeding regarding a
Covered Security-related termination for cause, the other Participants
of which the Common Member is a member shall furnish, upon request,
copies of all pertinent materials related thereto in their possession.
As used in this Section, ``for cause'' shall include, without
limitation, terminations characterized on Form U5 under the label
``Permitted to Resign,'' ``Discharge'' or ``Other.''
X. Each DOEA shall discharge the Regulatory Responsibility for each
Common Member allocated to it relative to a Covered Securities-related
customer complaint \2\ unless such complaint is uniquely related to
another Participant's market. In the latter instance, the DOEA shall
forward the matter to that Participant to whose market the matter
relates, and the latter shall discharge Regulatory Responsibility with
respect thereto. If a Participant receives a customer complaint for a
Common Member related to a Covered Security for which the Participant
is not the DOEA, the Participant shall promptly forward a copy of such
complaint to the DOEA.
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\2\ For purposes of complaints, they can be reported pursuant to
Form U4, Form U5 or RE-3 and any amendments thereto.
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XI. Any written notice required or permitted to be given under this
Agreement shall be deemed given if sent by certified mail, return
receipt requested, or by a comparable means of electronic communication
to each Participant entitled to receipt thereof, to the attention of
the Participant's representative on the Council at the Participant's
then principal office or by e-mail at such address as the
representative shall have filed in writing with the Chair.
XII. The Participants shall notify the Common Members of this
Agreement by means of a uniform joint notice approved by the Council.
XIII. This Agreement may be amended in writing duly approved by
each Participant.
XIV. Any of the Participants may manifest its intention to cancel
its participation in this Agreement at any time by giving the Council
written notice thereof at least 90 days prior to the effective date of
such cancellation. Upon receipt of such notice the Council shall
allocate, in accordance with the provisions of this Agreement, any
Common Members for which the petitioning party was the DOEA. Until such
time as the Council has completed the reallocation described above; the
petitioning Participant shall retain all its rights, privileges, duties
and obligations hereunder.
XV. The cancellation of its participation in this Agreement by any
Participant shall not terminate this Agreement as to the remaining
Participants. This Agreement will only terminate following notice to
the Commission, in writing, by the then Participants that they intend
to terminate the Agreement and the expiration of the applicable notice
period. Such notice shall be given at least six months prior to the
intended date of termination, provided that in the event a notice of
cancellation is received from a Participant that, assuming the
effectiveness thereof, would result in there being just one remaining
member of the Council, notice to the Commission of termination of this
Agreement shall be given promptly upon the receipt of such notice of
cancellation, which termination shall be effective upon the
effectiveness of the cancellation that triggered the notice of
termination to the Commission.
XVI. No Participant nor the Council nor any of their respective
directors, governors, officers, employees or representatives shall be
liable to any other Participant in this Agreement for any liability,
loss or damage resulting from or claimed to have resulted from any
delays, inaccuracies, errors or omissions with respect to the provision
of Regulatory Responsibility as provided hereby or for the failure to
provide any such Responsibility, except with respect to such liability,
loss or damages as shall have been suffered by one or more of the
Participants and caused by the willful misconduct of one or more of the
other participants or their respective directors, governors, officers,
employees or representatives. No warranties, express or implied, are
made by any or all of the Participants or the Council with respect to
any Regulatory Responsibility to be performed by each of them
hereunder.
XVII. Pursuant to Section 17(d)(1)(A) of the Securities Exchange
Act of 1934 and Rule 17d-2 promulgated pursuant thereto, the
Participants join in requesting the Securities and Exchange Commission,
upon its approval of this Agreement or any part thereof, to relieve
those Participants which are from time to time participants in this
Agreement which are not the DOEA as to a Common Member of any and all
Regulatory Responsibility with respect to the matters allocated to the
DOEA.
Common Rules
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Opening of Accounts
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AMEX................................ Rules 411, 921 and 1101.
BATS................................ Rule 26.2.
CBOE................................ Rule 9.7.
C2*................................. CBOE Rule 9.7.
ISE................................. Rule 608.
FINRA............................... Rules 2360(b)(16) and 2352.
NYSE................................ Rule 721.\1\
PHLX................................ Rule 1024(b) and (c).\2\
NYSE ARCA........................... Rule 9.2(a) and Rule 9.18(b).
BX/BOX.............................. Chapter XI, Section 9.
NASDAQ.............................. Chapter XI, Section 7.
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Supervision
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AMEX................................ Rules 411, 922 and 1104.
BATS................................ Rule 26.3.
CBOE................................ Rule 9.8.
C2.................................. CBOE Rule 9.8.
ISE................................. Rule 609.
FINRA............................... Rules 2360(b)(20), 2360(b)(17)(B),
2355 and 2358.
NYSE................................ N/A.
PHLX................................ Rule 1025.
NYSE ARCA........................... Rules 9.2(b) and 9.18(d)(2)(G).
BX/BOX.............................. Chapter XI, Section 10.
[[Page 9980]]
NASDAQ.............................. Chapter XI, Section 8.
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Suitability
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AMEX................................ Rules 923 and 1102.
BATS................................ Rule 26.4.
CBOE................................ Rule 9.9.
C2.................................. CBOE Rule 9.9.
ISE................................. Rule 610.
FINRA............................... Rule 2360(b)(19) and 2353.
NYSE................................ Rule 723.
PHLX................................ Rule 1026.
NYSE ARCA........................... Rule 9.18(c).
BX/BOX.............................. Chapter XI, Section 11.
NASDAQ.............................. Chapter XI, Section 9.
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Discretionary Accounts
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AMEX................................ Rules 421, 924 and 1103.
BATS................................ Rule 26.5.\3\
CBOE................................ Rule 9.10.
C2.................................. CBOE Rule 9.10.
ISE................................. Rule 611.
FINRA............................... Rules 2360(b)(18) and 2354.
NYSE................................ N/A.
PHLX................................ Rule 1027.
NYSE ARCA........................... Rule 9.18(e).
BX/BOX.............................. Chapter XI, Section 12.
NASDAQ.............................. Chapter XI, Section 10.
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Customer Communications (Advertising)
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AMEX................................ Rules 991 and 1106.
BATS................................ Rule 26.16.
CBOE................................ Rule 9.21.\4\
C2.................................. CBOE Rule 9.21.\4\
ISE................................. Rule 623.\4\
FINRA............................... Rules 2220 and 2357.
NYSE................................ N/A.
PHLX................................ N/A.
NYSE ARCA........................... N/A.
BX/BOX.............................. Chapter XI, Section 24.\4\
NASDAQ.............................. Chapter XI, Section 22.
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Customer Complaints
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AMEX................................ Rules 932 and 1105.
BATS................................ Rule 26.17.
CBOE................................ Rule 9.23.
C2.................................. CBOE Rule 9.23.
ISE................................. Rule 625.
FINRA............................... FINRA Rules 2360(b)(17)(A) and
2356 and NASD Rule 3070(a) and
(c).
NYSE................................ Rules 732 & 351(a) and (d).
PHLX................................ Rule 1070.
NYSE ARCA........................... Rule 9.18(I).
BX/BOX.............................. Chapter XI, Section 26.
NASDAQ.............................. Chapter XI, Section 24.
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Customer Statements
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AMEX................................ Rules 419 and 930.
BATS................................ Rule 26.7.
CBOE................................ Rule 9.12.
C2.................................. CBOE Rule 9.12.
ISE................................. Rule 613.
FINRA............................... Rule 2360(b)(15).
NYSE................................ Rule 730.
PHLX................................ Rule 1032.
NYSE ARCA........................... Rule 9.18(j).
BX/BOX.............................. Chapter XI, Sections 14.
NASDAQ.............................. Chapter XI, Sections 12.
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Confirmations
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AMEX................................ Rule 925.
BATS................................ Rule 26.6.
CBOE................................ Rule 9.11.
C2.................................. CBOE Rule 9.11.
ISE................................. Rule 612.
FINRA............................... Rule 2360(b)(12).
NYSE................................ Rule 725.\5\
PHLX................................ Rule 1028.
NYSE ARCA........................... Rule 9.18(f).
BX/BOX.............................. Chapter XI, Section 13.
NASDAQ.............................. Chapter XI, Section 11.
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Allocation of Exercise Assignment Notices
------------------------------------------------------------------------
AMEX................................ Rule 981.
BATS................................ Rule 23.2.
CBOE................................ Rule 11.2.
C2.................................. CBOE Rule 11.2.
ISE................................. Rule 1101.
FINRA............................... Rule 2360(b)(23)(C).
NYSE................................ Rule 781.
PHLX................................ Rule 1043.
NYSE ARCA........................... Rule 6.25(a).
BX/BOX.............................. Chapter VII, Section 2.
NASDAQ.............................. Chapter VIII, Section 2.
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Disclosure Documents
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AMEX................................ Rules 921 and 926.
BATS................................ Rule 26.10.
CBOE................................ Rule 9.15.
C2.................................. CBOE Rule 9.15.
ISE................................. Rule 616.
FINRA............................... Rule 2360(b)(11).
NYSE................................ Rule 726(a) and (c).
PHLX................................ Rule 1024(b)(v), 1029.
NYSE ARCA........................... Rule 9.18(g).
BX/BOX.............................. Chapter XI, Section 17.
NASDAQ.............................. Chapter XI, Section 15.
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Branch Offices of Member Organizations
------------------------------------------------------------------------
AMEX................................ Rule 922(d).\6\
CBOE................................ Rule 9.6.
C2.................................. CBOE Rule 9.6.
ISE................................. Rule 607.
FINRA............................... Rules 2360(b)(20)(B) and 2355.
NYSE................................ N/A.
PHLX................................ N/A.
NYSE ARCA........................... Rule 9.18(m).
BX/BOX.............................. Chapter XI, Section 8.
NASDAQ.............................. Chapter XI, Section 6.
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Prohibition Against Guarantees
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AMEX................................ Rule 390.
BATS................................ Rule 26.13.
CBOE................................ Rule 9.18.
C2.................................. CBOE Rule 9.18.
ISE................................. Rules 619 and 620.
FINRA............................... Rule 2150(b).
NYSE................................ Rule 2150(b).
PHLX................................ Rule 777.
NYSE ARCA........................... Rule 9.1(e).
BX/BOX.............................. Chapter XI, Sections 20 and 21.
NASDAQ.............................. Chapter XI, Sections 18 and 19.
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Sharing in Accounts
------------------------------------------------------------------------
AMEX................................ Rule 390.\7\
BATS................................ Rule 26.14.
CBOE................................ Rule 9.18(b).\8\
C2.................................. CBOE Rule 9.18(b).\8\
ISE................................. Rule 620.\7\
FINRA............................... Rule 2150(c).
NYSE................................ Rule 2150(c).
PHLX................................ N/A.
NYSE ARCA........................... Rule 9.1(f).
BX/BOX.............................. Chapter XI, Section 21.\8\
NASDAQ.............................. Chapter XI, Section 19.\8\
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Registration of ROP
------------------------------------------------------------------------
AMEX................................ Rule 920.
BATS................................ 17.2(g)(1), (2), (6) and (7).
CBOE................................ Rule 9.2.
C2.................................. CBOE Rule 9.2.
ISE................................. Rule 601.
FINRA............................... NASD Rules 1022(f) & IM-1022-1.
NYSE................................ N/A.
PHLX................................ Rule 1024(a)(i).
NYSE ARCA........................... Rule 9.26.
BX/BOX.............................. Chapter XI, Section 2.
NASDAQ.............................. Chapter XI, Section 2.
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Certification of Registered Personnel
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AMEX................................ Rule 920.
BATS................................ Rule 2.5 Interpretation .01(c) and
11.4(e).
CBOE................................ Rule 9.3.
C2.................................. CBOE Rule 9.3.
ISE................................. Rule 602.
FINRA............................... NASD Rule 1032(d).
NYSE................................ N/A.
PHLX................................ Rule 1024.
NYSE ARCA........................... Rule 9.27(a).
BX/BOX.............................. Chapter XI, Section 3.
NASDAQ.............................. Chapter XI, Section 3.
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*Pursuant to C2 Chapters 9 and 11, the rules contained in CBOE Chapters
IX and XI and referenced herein shall apply to C2.
\1\ FINRA shall not have any Regulatory Responsibility regarding opening
short uncovered option accounts requirements.
\2\ FINRA shall not have any Regulatory Responsibility regarding foreign
currency option requirements specified in any of the PHLX rules in
this Exhibit A.
\3\ FINRA shall not have any Regulatory Responsibility to enforce this
rule as to time and price discretion in institutional accounts.
\4\ FINRA shall not have any Regulatory Responsibility regarding the
self regulatory organization's (``SRO'') requirements to the extent
that a customer would meet FINRA's definition of Institutional
Investor and Institutional Sales Material but would not meet the
requirements for such definitions in under the SRO's rule. In
addition, FINRA shall not have any Regulatory Responsibility regarding
the SRO's requirements regarding approval of all market letters.
\5\ FINRA shall not have any Regulatory Responsibility regarding the
requirement in confirmations to distinguish between NYSE option
transactions and other transactions in option contracts.
\6\ FINRA shall only have Regulatory Responsibility for the first
paragraph and shall not have any Regulatory Responsibility regarding
the requirements for debt options.
[[Page 9981]]
\7\ FINRA shall not have any Regulatory Responsibility regarding the
self regulatory organization's requirements to the extent such rules
do not contain an exception to permit sharing in the profits and
losses of an account.
\8\ FINRA shall not have any Regulatory Responsibility regarding the
self regulatory organization's requirements to the extent such rules
do not contain an exception addressing immediate family.
IV. Solicitation of Comments
In order to assist the Commission in determining whether to approve
the 17d-2 plan, interested persons are invited to submit written data,
views, and arguments concerning the foregoing. Comments may be
submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/other.shtml); or
Send an e-mail to [email protected]. Please include
File Number S7-966 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number S7-966. 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/other.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed plan that are filed with the
Commission, and all written communications relating to the proposed
plan 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, on official business days between
the hours of 10 a.m. and 3 p.m. Copies of the plan also will be
available for inspection and copying at the principal offices of BATS,
CBOE, C2, ISE, FINRA, NYSE, Amex, Arca, NASDAQ, BX and the Phlx. 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 S7-966 and should be submitted
on or before March 25, 2010.
V. Discussion
The Commission continues to believe that the proposed plan is an
achievement in cooperation among the SRO participants, and will reduce
unnecessary regulatory duplication by allocating to the designated SRO
the responsibility for certain options-related sales practice matters
that would otherwise be performed by multiple SROs. The plan promotes
efficiency by reducing costs to firms that are members of more than one
of the SRO participants. In addition, because the SRO participants
coordinate their regulatory functions in accordance with the plan, the
plan promotes, and will continue to promote, investor protection.
Under paragraph (c) of Rule 17d-2, the Commission may, after
appropriate notice and comment, declare a plan, or any part of a plan,
effective. In this instance, the Commission believes that appropriate
notice and comment can take place after the proposed amendment is
effective. The primary purpose of the amendment is to add BATS
Exchange, Inc. and C2 Options Exchange, Incorporated as SRO
participants and to reflect the name changes of the American Stock
Exchange, LLC to the NYSE Amex LLC, the Boston Stock Exchange, Inc. to
the NASDAQ OMX BX, Inc., and the Philadelphia Stock Exchange, Inc. to
the NASDAQ OMX PHLX, Inc. The Commission notes that the prior version
of this plan immediately prior to this proposed amendment was published
for comment and the Commission did not receive any comments
thereon.\17\ Furthermore, the Commission does not believe that the
amendment to the plan raises any new regulatory issues that the
Commission has not previously considered.
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\17\ See supra note 16 (citing to Securities Exchange Act
Release No. 57987).
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VI. Conclusion
This order gives effect to the amended plan submitted to the
Commission that is contained in File No. S7-966.
It is therefore ordered, pursuant to Section 17(d) of the Act,\18\
that the amended plan dated February 5, 2010 by and between the BATS,
CBOE, C2, ISE, FINRA, NYSE, Amex, Arca, NASDAQ, BX and the Phlx filed
pursuant to Rule 17d-2 is hereby approved and declared effective.
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\18\ 15 U.S.C. 78q(d).
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It is further ordered that those SRO participants that are not the
DOEA as to a particular common member are relieved of those regulatory
responsibilities allocated to the common member's DOEA under the
amended plan to the extent of such allocation.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(34).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-4456 Filed 3-3-10; 8:45 am]
BILLING CODE 8011-01-P