13248 Federal Register / Vol. 76, No. 47 / Thursday, March 10, 2011 / Notices 

10The text of the proposed rule change is 

available on Exchange’s Web site at http:// 

www.directedge.com, on the Commission’s Web site 

at http://www.sec.gov, at EDGX, and at the 

Commission’s Public Reference Room. 

11 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. 63751 

(January 21, 2011), 76 FR 4966 (‘‘Notice’’). 

4See FINRA By-Laws, Schedule A, section 1 

(describing how the TAF is applied). 

5See FINRA Rule 6710(m) (defining ‘‘AssetBacked Security’’). 

6 In addition to the TAF, the other member 

regulatory fees are the Gross Income Assessment 

and the Personnel Assessment. 

7See FINRA By-Laws, Schedule A, section 

1(b)(2). 

8See Securities Exchange Act Release No. 61566 

(February 22, 2010), 75 FR 9262 (March 1, 2010). 

See also Regulatory Notice 10–23 (April 2010). 

9See FINRA Rules 6730(c)(2) and 6730(d)(2). 

10See Securities Exchange Act Release No. 63223 

(November 1, 2010), 75 FR 68654 (November 8, 

2010) (extending the operational date of SR– 

FINRA–2009–065 to no later than June 1, 2011). 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–EDGX–2011–05. 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,10 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–EDGX– 

2011–05 and should be submitted on or 

before March 31, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–5442 Filed 3–9–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64041; File No. SR–FINRA– 

2011–004] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Granting 

Approval of a Proposed Rule Change 

Relating to the Trading Activity Fee 

Rate for Transactions in Asset-Backed 

Securities 

March 4, 2011. 

I. Introduction 

On January 10, 2011, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a 

proposed rule change to provide a new 

method of calculating the Trading 

Activity Fee (‘‘TAF’’) for transactions in 

Asset-Backed Securities. The proposed 

rule change was published for comment 

in the Federal Register on January 27, 

2011.3 The Commission received no 

comments on the proposal. This order 

approves the proposed rule change. 

II. Description of the Proposal 

FINRA proposes to amend Section 1 

of Schedule A to the FINRA By-Laws to 

provide a new method of calculating the 

TAF 4 for transactions in Asset-Backed 

Securities.5 The TAF is one of the 

member regulatory fees FINRA uses to 

fund its member regulation activities, 

which include examinations; financial 

monitoring; and FINRA’s policymaking, 

rulemaking, and enforcement activities.6

Generally, the TAF is assessed on the 

sale of all exchange-registered securities 

wherever executed (except debt 

securities that are not Trade Reporting 

and Compliance Engine (‘‘TRACE’’)- 

Eligible Securities), over-the-counter 

equity securities, security futures, 

TRACE-Eligible Securities (provided 

that the transaction is a Reportable 

TRACE Transaction), and all municipal 

securities subject to MSRB reporting 

requirements. The rules governing the 

TAF also include a list of transactions 

exempt from the TAF.7

In 2010, the Commission approved a 

proposed rule change that generally 

makes transactions in Asset-Backed 

Securities reportable to TRACE.8

Because Asset-Backed Securities will be 

TRACE-Eligible Securities, transactions 

in Asset-Backed Securities will 

generally be subject to the TAF. 

Currently, when reporting the size of 

a corporate bond transaction to TRACE, 

the number of bonds is reported and the 

TRACE System, which is programmed 

to reflect that one bond equals $1,000 

par value, calculates the total dollar 

volume of the transaction (e.g., 10 bonds 

× $1,000=$10,000).9 Based on this 

reporting structure, the TAF is assessed 

on a per-bond basis, but the number of 

bonds is a proxy for the size of the total 

dollar volume of a transaction in $1,000 

increments. Although some AssetBacked Securities are structured like 

conventional corporate bonds, many are 

structured differently. For example, 

many Asset-Backed Securities are based 

on financial assets that amortize, and 

the principal (or face) value declines 

over time. Accordingly, transactions in 

Asset-Backed Securities will not be 

reported to TRACE on a per-bond basis 

like conventional corporate bonds, but 

rather will be reported based on the 

original principal (or face) value of the 

underlying security or the Remaining 

Principal Balance. 

Consequently, FINRA is proposing to 

conform the TAF rate for sales of AssetBacked Securities consistent with the 

reporting of such transactions to 

TRACE. Accordingly, FINRA is 

proposing to base the TAF for sales of 

Asset-Backed Securities on the size of 

the transaction as reported to TRACE 

(i.e., par value, or, where par value is 

not used to determine the size of the 

transaction, the lesser of original face 

value or Remaining Principal Balance) 

at a rate of $0.00000075 times the size 

of the transaction as reported to TRACE, 

with a maximum charge of $0.75 per 

trade. 

The effective date of the proposed 

rule change will be the date the 

proposed rule change SR–FINRA–2009– 

065 becomes effective, which is 

currently anticipated to be May 16, 

2011.10


jdjones on DSK8KYBLC1PROD with NOTICES
Federal Register / Vol. 76, No. 47 / Thursday, March 10, 2011 / Notices 13249 

11 In approving this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

12 15 U.S.C. 78o–3(b)(5). 

13 15 U.S.C. 78s(b)(2). 

14 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4A company seeking to choose a DMM through 

the allocation process must select a minimum of 

three DMM units to interview from the pool of 

DMM units eligible to participate in the allocation 

process and must notify the Exchange of its choice 

of DMM within two business days of the interviews. 

Alternatively, the company can delegate to the 

Exchange the authority to select its DMM. In that 

case, the selection is made by an Exchange 

Selection Panel (‘‘ESP’’) comprised of senior 

management of the Exchange, Exchange floor 

operations staff and non-DMM Executive Floor 

Governors or Floor Governors. 

III. Discussion and Commission’s 

Findings 

After carefully reviewing the 

proposed rule change, the Commission 

finds that the proposal is consistent 

with the requirements of the Act and the 

rules and regulations thereunder 

applicable to a national securities 

association.11 In particular, the 

Commission finds that the proposal is 

consistent with Section 15A(b)(5) of the 

Act,12 which requires that a national 

securities association have rules that 

provide for the equitable allocation of 

reasonable dues, fees, and other charges 

among its members and other persons 

using any facility or system that the 

association operates or controls. The 

Commission believes that the proposal 

is reasonably designed to impose 

equitable fees on members that transact 

in Asset-Backed Securities, where the 

principal value of the securities may 

decline over time. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,13 that the 

proposed rule change (SR–FINRA– 

2011–004), be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–5518 Filed 3–9–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64040; File No. SR– 

NYSEAmex–2011–11] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Notice of Filing of 

Proposed Rule Change Amending Rule 

103B—NYSE Amex Equities To Modify 

the Application of the Exchange’s 

Designated Market Maker Allocation 

Policy in the Event of a Merger 

Involving One or More Listed 

Companies 

March 4, 2011. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that on February 

24, 2011, NYSE Amex LLC (the 

‘‘Exchange’’ or ‘‘NYSE Amex’’) 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Rule 103B—NYSE Amex Equities to 

modify the application of the 

Exchange’s Designated Market Maker 

(‘‘DMM’’) allocation policy in the event 

of a merger involving one or more listed 

companies. The text of the proposed 

rule change is available at the Exchange, 

the Commission’s Public Reference 

Room, on the Commission’s Web site at 

http://www.sec.gov, and http:// 

www.nyse.com. 

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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Policy Note VI(D)(1) to Rule 103B— 

NYSE Amex Equities provides that 

when two NYSE Amex listed companies 

merge, the post-merger listed company 

is assigned to the DMM in the company 

that is determined to be the survivor-infact (dominant company). Under 

Exchange policy, the determination of 

which company is the survivor-in-fact is 

based on which of the merging 

companies provides the chief executive 

officer and a majority of the board of 

directors of the post-merger listed 

company. The policy focuses on the 

CEO and the make-up of the board of 

the post-merger listed company rather 

than on any criteria based on the 

relative sizes of the pre-merger 

companies because the Exchange 

believes that the post-merger listed 

company’s CEO and board will have the 

relationship with the DMM going 

forward and should therefore be 

comfortable with the DMM allocated to 

the post-merger listed company. Under 

the Exchange policy, no survivor-in-fact 

will be found if one of the merging 

companies provides the CEO and the 

other merging company provides a 

majority or half of the board of the postmerger listed company. Where no 

survivor-in-fact can be identified, the 

post-merger listed company may select 

one of the units trading the merging 

companies without the security being 

referred for reallocation, or it may 

request that the matter be referred for 

allocation through the allocation 

process pursuant to Rule 103B—NYSE 

Amex Equities, Section III. In addition, 

Policy Note VI(D)(3) provides that in 

situations involving the merger of a 

listed company and an unlisted 

company, where the unlisted company 

is determined to be the survivor-in-fact, 

the post-merger listed company may 

choose to remain registered with the 

DMM unit that had traded the listed 

company entity in the merger, or it may 

request that the matter be referred for 

allocation through the allocation 

process pursuant to Rule 103B—NYSE 

Amex Equities.4

The Exchange believes that the 

decision as to how the stock of a postmerger listed company is allocated 

should be made solely by the postmerger listed company itself, rather than 

on the basis of which company is 

determined to be the survivor-in-fact in 

the merger. The Exchange believes that 

it is important that the CEO and board 

of the post-merger listed company are 

comfortable with its assigned DMM and 

that it therefore makes sense to give the 

post-merger listed company as much 

control as possible over the allocation 

decision. Consequently, the Exchange 

proposes to amend Policy Note VI(D)(1) 

and (3) to provide that in all listed 

company mergers, either between two 

listed companies or a listed company 

and an unlisted company, the 

management of the post-merger listed 


jdjones on DSK8KYBLC1PROD with NOTICES