9384 Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Notices 

10 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3For a detailed description of the Investor 

Support Program, see Securities Exchange Act 

Release No. 63270 (November 8, 2010), 75 FR 69489 

(November 12, 2010)(NASDAQ–2010–141) (notice 

of filing and immediate effectiveness)(the ‘‘ISP 

Filing’’). See also Securities Exchange Act Release 

Nos. 63414 (December 2, 2010), 75 FR 76505 

(December 8, 2010)(NASDAQ–2010–153) (notice of 

filing and immediate effectiveness); and 63628 

(January 3, 2011), 76 FR 1201 (January 7, 

2011)(NASDAQ–2010–154) (notice of filing and 

immediate effectiveness). 

4The Commission has recently expressed its 

concern that a significant percentage of the orders 

of individual investors are executed at over the 

counter (‘‘OTC’’) markets, that is, at off-exchange 

markets; and that a significant percentage of the 

orders of institutional investors are executed in 

dark pools. Securities Exchange Act Release No. 

61358 (January 14, 2010), 75 FR 3594 (January 21, 

2010) (Concept Release on Equity Market Structure, 

‘‘Concept Release’’). In the Concept Release, the 

Commission has recognized the strong policy 

preference under the Act in favor of price 

transparency and displayed markets. The 

Commission published the Concept Release to 

invite public comment on a wide range of market 

structure issues, including high frequency trading 

and un-displayed, or ‘‘dark,’’ liquidity. See also 

Mary L. Schapiro, Strengthening Our Equity Market 

Structure (Speech at the Economic Club of New 

York, Sept. 7, 2010) (‘‘Schapiro Speech,’’ available 

on the Commission Web site) (comments of 

Commission Chairman on what she viewed as a 

troubling trend of reduced participation in the 

equity markets by individual investors, and that 

nearly 30 percent of volume in U.S.-listed equities 

is executed in venues that do not display their 

liquidity or make it generally available to the 

public). 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–CBOE–2011–015 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–CBOE–2011–015. 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 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–CBOE– 

2011–015 and should be submitted on 

or before March 10, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–3554 Filed 2–16–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63891; File No. SR– 

NASDAQ–2011–022] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Enhance 

the Investor Support Program 

February 11, 2011. 

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 February 

2, 2011, The NASDAQ Stock Market 

LLC (‘‘NASDAQ’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by NASDAQ. The Commission 

is publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

NASDAQ proposes changes to the fee 

provisions of Rule 7014 (Investor 

Support Program) to increase the rebate 

for adding targeted liquidity within the 

Investor Support Program. NASDAQ has 

designated this fee change proposal 

effective and operative upon filing. 

The text of the proposed rule change 

is available at http:// 

nasdaq.cchwallstreet.com, at 

NASDAQ’s principal office, 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, 

NASDAQ 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. 

NASDAQ 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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange is proposing changes to 

the fee provisions of Rule 7014 to 

increase the rebate for adding targeted 

liquidity within the Investor Support 

Program. 

The Exchange established an Investor 

Support Program (‘‘ISP’’) that enables 

NASDAQ members to earn a monthly 

fee credit for providing additional 

liquidity to NASDAQ and increasing the 

NASDAQ-traded volume of what are 

generally considered to be retail and 

institutional investor orders in 

exchange-traded securities (‘‘targeted 

liquidity’’).3 The goal of the ISP is to 

incentivize members to provide such 

targeted liquidity to the NASDAQ 

Market Center.4 The Exchange noted in 

the ISP Filing that maintaining and 

increasing the proportion of orders in 

exchange-listed securities executed on a 

registered exchange (rather than relying 

on any of the available off-exchange 

execution methods) would help raise 

investors’ confidence in the fairness of 

their transactions and would benefit all 

investors by deepening NASDAQ’s 

liquidity pool, supporting the quality of 

price discovery, promoting market 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Notices 9385 

5The term ‘‘Participation Ratio’’ is defined as: for 

a given member in a given month, the ratio of (i) 

the number of shares of liquidity provided in orders 

entered by the member through any of its Nasdaq 

ports and executed in the Nasdaq Market Center 

during such month to (ii) the Consolidated Volume. 

Rule 7014 (d)(4). 

The term ‘‘Consolidated Volume’’ is defined as: 

for a given member in a given month, the 

consolidated volume of shares of System Securities 

in executed orders reported to all consolidated 

transaction reporting plans by all exchanges and 

trade reporting facilities during such month. Rule 

7014(d)(6). 

6The term ‘‘System Securities’’ is defined as: all 

securities listed on NASDAQ and all securities 

subject to the Consolidated Tape Association Plan 

and the Consolidated Quotation Plan. Rule 4751(b). 

7See Rule 7014(d)(2) and (d)(4). 

8The term ‘‘Added Liquidity’’ is defined as: for a 

given member in a given month, the number of 

shares calculated by (i) subtracting from such 

member’s Participation Ratio for that month the 

member’s Baseline Participation Ratio, and then (ii) 

multiplying the resulting difference by the average 

daily consolidated volume of shares of System 

Securities in executed orders reported to all 

consolidated transaction reporting plans by all 

exchanges and trade reporting facilities during such 

month; provided that if the result is a negative 

number, the Added Liquidity amount shall be 

deemed zero. Rule 7014(d)(1). 

9Subsection (c)(1) (which simply consolidates 

current subsections (c)(1) and (c)(2)) states that a 

member shall not be entitled to receive any ISP 

credit pursuant to (b) for a given month if any of 

the following applies: (A) the member’s ISP 

Execution Ratio for the month in question is 10 or 

above; or (B) the average daily number of shares of 

liquidity provided in orders entered by the member 

through its ISP-designated ports and executed in 

the Nasdaq Market Center during the month is 

below 10 million, provided that in calculating such 

average, Nasdaq will exclude days when it is open 

for less than the entire regular trading day. 

10 0.43% is the equivalent of approximately 35 

million shares of added liquidity per day (based on 

January 2011 consolidated market activity). 

11See Securities Exchange Act Release No. 63270 

(November 8, 2010), 75 FR 69489 (November 12, 

2010)(NASDAQ–2010–141)(notice of filing and 

immediate effectiveness). 

12 15 U.S.C. 78f. 

13 15 U.S.C. 78f(b)(4) and (5). 

14See Section 6(b)(5) of the Act, 15 U.S.C. 

78f(b)(5). 

15See Section 6(b)(4) of the Act, 15 U.S.C. 

78f(b)(4). 

16See, e.g., Concept Release (discusses the 

various venues where trades are executed). 

transparency and improving investor 

protection. 

The Exchange now proposes an 

adjustment to the Investor Support 

Program, in the form of an increase in 

the rebate for the ISP. The primary 

objective in making this adjustment is to 

further incentivize members to provide 

targeted liquidity to the Exchange by 

increasing the rebate for those that bring 

the largest amounts to NASDAQ. 

The ISP generally compares a 

member’s Participation Ratio for the 

current month to the same member’s 

Participation Ratio in August 2010 

(known as the ‘‘Baseline Participation 

Ratio’’).5 This ratio is determined by 

measuring the number of shares in 

liquidity-providing orders entered by 

the member (through any NASDAQ 

port) and executed on NASDAQ and 

dividing this number by the 

consolidated (across all trading venues) 

share volume of System Securities 6

traded in the given month.7 To 

determine the amount of the ISP credit 

pursuant to the program, pursuant to 

sub-section (b), NASDAQ would 

multiply $0.0003 by the lower of: the 

number of shares of displayed liquidity 

provided in orders entered by the 

member through its ISP-designated 

ports and executed in the NASDAQ 

Market Center during the given month; 

or the amount of Added Liquidity 8 for 

the given month, which is compared to 

the member’s Baseline Participation 

Ratio. The Exchange proposes to 

increase the rebate to a rate of $0.0004 

for members that bring a greater amount 

of targeted liquidity. 

Specifically, the Exchange clarifies 

subsection (b) to state that, subject to the 

conditions set forth in section (c) the 

rebate rate may be $0.0003 or $0.0004.9

The Exchange adds proposed subsection (c)(2) to indicate that the 

$.00004 rebate rate is available to those 

members that bring in an even greater 

amount of liquidity by exceeding the 

Baseline Participation Ration by at least 

0.43%.10 The Exchange believes that the 

increased rebate should encourage 

members to strive to bring even more 

retail and institutional orders in 

exchange-traded securities to the 

Exchange. 

The ISP is designed to operate on a 

monthly cycle, both from the 

perspective of targeted flow brought to 

the Exchange and ISP rebates to 

members that brought such flow. Since 

its inception,11 the ISP fee program has 

been, and continues to be, nondiscriminatory, reasonable, and effective 

in attracting targeted liquidity to the 

NASDAQ Market Center. The primary 

objective in making the proposed 

adjustment is to encourage members to 

bring larger amounts of targeted 

liquidity to the Exchange by increasing 

the rebate for such liquidity. The 

Exchange believes that its proposal is 

decidedly non-discriminatory because it 

does not favor or distinguish any group 

of ISP participants while promoting the 

clear goal of the ISP. 

2. Statutory Basis 

NASDAQ believes that the proposed 

rule change is consistent with the 

provisions of Section 6 of the Act,12 in 

general, and with Sections 6(b)(4) and 

6(b)(5) of the Act,13 in particular, in that 

it provides for the equitable allocation 

of reasonable dues, fees and other 

charges among members and issuers and 

other persons using any facility or 

system which NASDAQ operates or 

controls, and 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, in general, to protect investors and 

the public interest. 

The Investor Support Program 

encourages members to add targeted 

liquidity that is executed in the 

NASDAQ Market Center. The primary 

objective in making this enhancement to 

the Investor Support Program is to add 

an even greater amount of targeted 

liquidity to the Exchange. The rule 

change proposal, like the ISP, is ‘‘not 

designed to permit unfair 

discrimination’’ 14 but, rather, is 

intended to promote submission of 

liquidity-providing orders to NASDAQ, 

which would benefit all NASDAQ 

members and all investors. Likewise, 

the proposal, like the ISP, is consistent 

with the Act’s requirement ‘‘for the 

equitable allocation of reasonable dues, 

fees, and other charges.’’ 15 As explained 

in the immediately preceding 

paragraphs, the proposal enhances the 

goal of the ISP. Members who choose to 

significantly increase the volume of ISPeligible liquidity-providing orders that 

they submit to NASDAQ would be 

benefitting all investors, and therefore 

an additional credit, as contemplated in 

the proposed enhanced program, is 

equitable. Finally, NASDAQ notes that 

the intense competition among several 

national securities exchanges and 

numerous OTC venues effectively 

guarantees that fees and credits for the 

execution of trades in NMS securities 

remain equitable and are not unfairly 

discriminatory.16

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

NASDAQ 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 


jlentini on DSKJ8SOYB1PROD with NOTICES
9386 Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Notices 

17 15 U.S.C. 78s(b)(3)(a)(ii). 

18 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 61168 

(December 15, 2009); 74 FR 68084 (‘‘Notice’’). 

4See Letter to Elizabeth Murphy, Secretary, 

Commission, from Patrick Chi, Chief Compliance 

Officer, ITG, Inc., dated January 12, 2010 (‘‘ITG 

Letter’’); Letter to Elizabeth M. Murphy, Secretary, 

Commission, from R. Cromwell Coulson, Chief 

Executive Officer, Pink OTC Markets Inc., dated 

January 18, 2010 (‘‘Pink OTC Letter’’); Letter to 

Elizabeth M. Murphy, Secretary, Commission, from 

Ann Vlcek, Managing Director and Associate 

General Counsel, SIFMA, dated January 28, 2010 

(‘‘SIFMA Letter’’); and Letter to Elizabeth M. 

Murphy, Secretary, Commission, from Leonard J. 

Amoruso, General Counsel, Knight Capital Group, 

Inc. and Michael T. Corrao, Chief Compliance 

Officer, Knight Equity Markets, L.P., dated February 

22, 2010 (‘‘Knight Letter’’). 

5See Letter to Elizabeth M. Murphy, Secretary, 

Commission, from Racquel Russell, Assistant 

General Counsel, Regulatory Policy and Oversight, 

FINRA, dated August 31, 2010 (‘‘FINRA Letter’’). 

6Amendment No. 1 modifies the proposal to 

remove the requirement that a member assign and 

use a unique market participant identifier (MPID) 

for its market-making desks where the member 

structures its order handling practices in NMS 

stocks to permit its market-making desks to trade 

at prices that would satisfy customer orders held at 

a separate unit. The amendment also addresses the 

applicability of interpretive guidance previously 

issued in connection with NASD IM–2110–2 and 

NASD Rule 2111 to new FINRA Rule 5320. FINRA 

stated that, consistent with its existing policy, 

where a provision of FINRA Rule 5320 is not 

substantively different from NASD IM–2110–2 or 

NASD Rule 2111, previously issued interpretations 

generally will continue to apply (unless rescinded 

or updated by FINRA). The Commission expects 

FINRA to update, as soon as practicable, its 

interpretive guidance to reflect new FINRA Rule 

5320 and to rescind any previous interpretive 

guidance that is no longer applicable. The 

amendment also clarifies that, in the case of 

extended hours trading in foreign securities where 

currency fluctuations are possible, the price at 

which the proprietary transaction is executed, not 

the price of the proprietary order, is relevant in 

determining whether the customer order protection 

requirement has been triggered. Finally, 

Amendment No. 1 makes several non-substantive, 

technical changes to the rule text. 

7The current FINRA rulebook consists of: (1) 

FINRA Rules; (2) NASD Rules; and (3) rules 

incorporated from NYSE (‘‘Incorporated NYSE 

Rules’’). While the NASD Rules generally apply to 

all FINRA members, the Incorporated NYSE Rules 

apply only to those members of FINRA that are also 

members of the NYSE. The FINRA Rules apply to 

all FINRA members, unless such rules have a more 

limited application by their terms. For more 

information about the rulebook consolidation 

process, see Information Notice, March 12, 2008 

(Rulebook Consolidation Process). 

8Under Rule 600 of Regulation NMS, an NMS 

stock means any NMS security other than an 

19(b)(3)(A)(ii) of the Act.17 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. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

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 rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2011–022 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–NASDAQ–2011–022. 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 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– 

NASDAQ–2011–022 and should be 

submitted on or before March 10, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–3582 Filed 2–16–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63895; File No. SR–FINRA– 

2009–090] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Amendment No. 1 to a Proposed Rule 

Change and Order Granting 

Accelerated Approval of a Proposed 

Rule Change, as Modified by 

Amendment No. 1, To Adopt FINRA 

Rule 5320 (Prohibition Against Trading 

Ahead of Customer Orders) in the 

Consolidated FINRA Rulebook 

February 11, 2011. 

I. Introduction 

On December 12, 2009, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) (f/k/a National Association of 

Securities Dealers, Inc. (‘‘NASD’’)) 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 

19b–4 thereunder,2 a proposed rule 

change to adopt FINRA Rule 5320 in 

FINRA’s new consolidated rulebook 

(‘‘Consolidated FINRA Rulebook’’). The 

proposed rule change was published for 

comment in the Federal Register on 

December 22, 2009.3 The Commission 

received four comment letters on the 

proposed rule change 4 and a letter from 

FINRA responding to the comment 

letters.5 On January 24, 2011, FINRA 

filed Amendment No. 1 to the proposed 

rule change.6 This order approves the 

proposed rule change, as amended by 

Amendment No. 1. 

II. Description of Proposed Rule Change 

and Summary of Comments 

As part of the process of developing 

the Consolidated FINRA Rulebook,7

FINRA proposes to adopt NASD IM– 

2110–2 (Trading Ahead of Customer 

Limit Order) and NASD Rule 2111 

(Trading Ahead of Customer Market 

Orders) with significant changes as new 

FINRA Rule 5320 (Prohibition Against 

Trading Ahead of Customer Orders). 

NASD IM–2110–2 generally prohibits a 

member from trading for its own 

account in an NMS stock, as defined in 

Rule 600(b)(47) of Regulation NMS,8 or 


jlentini on DSKJ8SOYB1PROD with NOTICES