69478 Federal Register / Vol. 75, No. 218 / Friday, November 12, 2010 / Notices 

6 17 CFR 200.30–3(a)(29). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(2). 

5The Exchange represents that the PULSe 

workstation is merely a new front-end system 

interface to existing C2 trading systems (i.e., it is a 

new means of connecting to these existing trading 

systems), and does not require any changes to the 

Exchange’s surveillance or communications rules. 

Further, there is no change to, or impact on, the 

Exchange’s market structure as a result of the 

PULSe workstations. 

6The workstation will also have the capability to 

enable a user to send orders for commodity futures 

and commodity options to designated contract 

markets and other venues of the user’s choice at 

which the user has trading privileges and to futures 

commission merchants (each, an ‘‘FCM’’) and 

introducing brokers (each, an ‘‘IB’’) of the user’s 

choice. The workstation may also have the 

capability to enable a user to send orders in other 

non-security products to one or more destinations 

of the user’s choice. 

markets, to remove impediments to, and 

perfect the mechanisms of, a national 

market system, or otherwise in 

furtherance of the purposes of the Act. 

III. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed OPRA 

Plan amendment 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 

No. SR–OPRA–2010–03 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–OPRA–2010–03. 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 plan 

amendment that are filed with the 

Commission, and all written 

communications relating to the 

proposed plan amendment 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 OPRA. 

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–OPRA–2010–03 and should 

be submitted on or before December 3, 

2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.6

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–28547 Filed 11–10–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63246; File No. SR–C2– 

2010–007] 

Self-Regulatory Organizations; C2 

Options Exchange, Incorporated: 

Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Relating to PULSe Fees 

November 4, 2010. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on October 

28, 2010, C2 Options Exchange, 

Incorporated (the ‘‘Exchange’’ or ‘‘C2’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II and III below, which Items 

have been prepared by the Exchange. 

The Exchange has designated this 

proposal as one establishing or changing 

a due, fee, or other charge imposed by 

the Exchange under Section 

19(b)(3)(A)(ii) of the Act 3 and Rule 19b– 

4(f)(2) thereunder.4 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 its 

Fees Schedule to adopt fees for the use 

of a front-end order entry workstation, 

referred to as PULSe, that will be a 

facility of the Exchange. The text of the 

proposed rule change is available on the 

Exchange’s Web site (http:// 

www.cboe.org/legal), at the Exchange’s 

Office of the Secretary and at the 

Commission. 

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. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, Proposed Rule 

Change 

1. Purpose 

The purpose of this proposed rule 

change is to establish fees relating to the 

use of the PULSe order entry 

workstation on C2, which fees are 

modeled after the fees established for C2 

affiliates Chicago Board Options 

Exchange, Incorporated (‘‘CBOE’’) and 

the CBOE Stock Exchange (‘‘CBSX’’). 

The PULSe workstation is a front-end 

order entry system designed for use 

with respect to orders that may be sent 

to the trading systems of C2.5 In 

addition to providing the capability to 

send orders to the C2 market, the PULSe 

workstation will also provide a user 

with the capability to send options 

orders to other U.S. options exchanges 

(including CBOE) and stock orders to 

other U.S. stock exchanges (including 

CBSX) through a ‘‘PULSe Routing 

Intermediary’’ as further described 

below (‘‘away-market routing’’). 

Additionally, the PULSe workstation 

functionality will include access to 

consolidated real-time options and stock 

market data.6

The PULSe workstation will be made 

available by Signal Trading Systems, 

LLC (‘‘STS’’). STS is an affiliate of CBOE 

that is jointly owned by CBOE and 

FlexTrade Systems, Inc. (‘‘FlexTrade’’), a 

technology services provider. STS will 

grant licenses to use the workstation 

directly to C2 Permit Holders (‘‘Permit 

Holders’’) and their customers, 

including Sponsored Users. STS may 

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Federal Register / Vol. 75, No. 218 / Friday, November 12, 2010 / Notices 69479 

7The PULSe workstation may be made available 

by a TPH to its customers on a pass-through basis 

(where orders pass through the TPH’s systems prior 

to reaching the Exchange) or a sponsored access 

basis. To the extent that a TPH makes the 

workstation available to a customer on a sponsored 

access basis, the customer would be considered a 

‘‘sponsored user’’ and the TPH-customer 

relationship would be considered a Sponsoring 

Participant/Sponsored User relationship subject to 

the requirements of Rule 3.15, Sponsored Users. 

8Nothing about the PULSe order routing 

functionality would relieve any Permit Holder that 

is using the PULSe workstation from complying 

with its best execution obligations. Specifically, just 

as with any customer order and any other routing 

functionality, a Permit Holder would have an 

obligation to consider the availability of price 

improvement at various markets and whether 

routing a customer order through the PULSe 

functionality would allow for access to 

opportunities for price improvement if readily 

available. Moreover, a Permit Holder would need to 

conduct best execution evaluations on a regular 

basis, at a minimum quarterly, that would include 

its use of the PULSe workstation. 

9For example, if a Permit Holder were to enter 

an option order to buy 250 contracts using the 

sweep function at a time when C2 is at the NBBO 

for 100 contracts, the sweep function will be 

configured to send an order for 100 contracts to C2, 

with the balance of the order routed as specified by 

the Permit Holder entering the order from the 

configurations offered by the PULSe workstation. 

Nothing will require a person using the PULSe 

workstation to use the sweep function, and, in this 

same example, if the Permit Holder wished to route 

the entire order for 250 contracts to an exchange 

other than C2 using the PULSe workstation, the 

Permit Holder will be free to manually override C2 

as the default destination for the entire order. 

also determine to permit Permit Holders 

to make the workstation available to 

their customers, including Sponsored 

Users, through the use of a sublicense. 

However, whether the workstation 

technology is obtained through a direct 

license or sublicense from STS, any 

order routed to C2 through a PULSe 

workstation must be routed through a 

Permit Holder or by a Sponsored User 

(whose orders are sponsored by a Permit 

Holder).7 The Permit Holder will also be 

responsible for any applicable fees, 

which are described below. 

The Exchange proposes a monthly 

PULSe workstation fee to Permit 

Holders of $350 per Permit Holder 

workstation per month for the first 10 

PULSe workstations and $100 per 

Permit Holder workstation per month 

for each additional PULSe workstation. 

As discussed further below, Permit 

Holders may also make the workstation 

available to their customers, which may 

include non-broker dealer public 

customers and non-Permit Holder 

broker dealers (referred to herein as 

‘‘non-Permit Holders’’). For such nonPermit Holder workstations, the 

Exchange proposes to introduce a flat 

fee of $350/month per workstation. In 

instances where two or more Permit 

Holders wish to make a PULSe 

workstation available to the same nonPermit Holder customer, the Exchange 

is proposing to introduce a fee 

reduction. Under the reduction, if two 

or more Permit Holders make the PULSe 

workstation available to the same nonPermit Holder customer, then the 

monthly fee will be $250 per 

workstation per Permit Holder. The 

Exchange also proposes an away-market 

routing fee to the entering Permit Holder 

of $0.10 per executed options contract 

(or equivalent share amount in the case 

of stock) for away-market routing of 

orders through the PULSe workstation. 

The Exchange notes that the PULSe 

workstation offers the ability to route 

orders to any market, including CBOE. 

Therefore, to the extent a C2 TPH that 

is also a CBOE TPH obtains a PULSe 

workstation through C2, it is not 

necessary for that TPH to obtain a 

separate PULSe workstation through 

CBOE to route orders to CBOE. When 

the PULSe workstation is made 

available through C2 to a C2 TPH that 

is also a CBOE TPH, the PULSe 

workstation, away-market routing, and 

Routing Intermediary fees would be 

assessed by C2 only (e.g., the monthly 

fee to a C2 TPH for one PULSe is $350 

and the monthly fee for a CBOE TPH for 

one PULSe workstation is $350; if a 

PULSe workstation is made available 

through C2 to a C2 TPH that is also a 

CBOE TPH, the monthly fee would be 

$350, not $700). To the extent a C2 TPH 

is also a CBOE TPH, the away-market 

routing fee would not apply for the 

TPH’s executions on C2 or CBOE 

because the fee is only applicable for 

away-market routing. The TPH would 

not be routing away, but instead would 

be submitting orders directly to C2 as a 

C2 TPH or CBOE as a CBOE TPH, as 

applicable, where the TPH’s activity 

would be subject to the transaction fee 

schedule of C2 or CBOE, respectively. 

However, to the extent a C2 TPH is not 

a CBOE TPH, the away-market routing 

fee would apply to the C2 TPH’s 

executions on CBOE. 

The Exchange believes the fee 

structure represents an equitable 

allocation of reasonable fees in that the 

same fees are applicable to all users. 

The Exchange believes the workstation 

and routing intermediary fees are 

competitive with fees applicable to 

similar workstations that offer awaymarket routing services provided by 

other exchanges. The Exchange also 

believes it is reasonable and appropriate 

to reduce the monthly PULSe 

workstation fee when two or more TPHs 

make a workstation available to the 

same non-Permit Holder because, while 

we would still establish and maintain 

PULSe workstation technology 

arrangements with each TPH, we also 

anticipate that the non-Permit Holder’s 

use of the workstation would be 

distributed among the TPHs. In 

addition, the Exchange believes that the 

$0.10 away-market routing fee is 

reasonable and appropriate in light of 

the fact that it is small in relation to the 

value to the user of the PULSe 

workstation and its extensive 

functionality, including its ability to 

facilitate the routing of orders to any 

securities exchange and in relation to 

the total costs typically incurred in 

routing and executing orders. The 

Exchange believes it is not necessary to 

apply this fee to a C2 TPH’s executions 

on C2 (or to a dual C2 TPH/CBOE TPH’s 

executions on CBOE) because the TPH 

is not routing away. Instead the TPH is 

submitting orders directly to C2 (or 

CBOE, as applicable) where the activity 

is subject to the transaction fee schedule 

of C2 (or CBOE, respectively). The 

Exchange also notes that use of the 

PULSe workstation and the awaymarket routing functionality available 

through the PULSe workstation are not 

compulsory. The services are to be 

offered as a convenience to Permit 

Holders and would not be the exclusive 

means available to a Permit Holder to 

send orders to C2, CBOE, CBSX or 

intermarket. 

The PULSe workstation may be 

configured by the Exchange to cause C2 

and/or CBOE to be the default 

destination exchange(s) for individually 

executed marketable option orders if C2 

and/or CBOE is at the national best bid 

or offer (‘‘NBBO’’), regardless of size or 

time, but will allow any user to 

manually override C2 and/or CBOE as 

the default destination on an order-byorder basis.8 Similarly, the PULSe 

workstation may also be configured by 

the Exchange to cause CBSX to be the 

default designation exchange for 

individually executed marketable stock 

orders if CBSX is at the NBBO, 

regardless of size or time, but will allow 

the user to manually override CBSX as 

the default destination on an order-byorder basis. The workstation also 

incorporates a function allowing option 

(stock) orders at a specified price to be 

sent to multiple exchanges with a single 

click (‘‘sweep function’’). The sweep 

function may be configured by the 

Exchange to cause an option order to be 

sent to C2 and/or CBOE for up to the 

full size quoted by C2 and/or CBOE if 

C2 and/or CBOE is at the NBBO.9

Similarly, the sweep function may be 

configured by the Exchange to cause a 

stock order to be sent to CBSX for up to 

the full size quoted by CBSX if CBSX is 

at the NBBO. Again, the away-market 

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69480 Federal Register / Vol. 75, No. 218 / Friday, November 12, 2010 / Notices 

10With respect to options (stocks), the Exchange 

also notes that the away-market functionality in the 

PULSe workstation will not displace the provisions 

of the Options Order Protection and Locked/ 

Crossed Market Plan (Regulation NMS), which will 

continue to apply in the circumstances described in 

the Plan (Regulation NMS). 

11The Exchange believes that the PULSe 

workstation will, in the language of Section 3(a)(2) 

of the Act, 15 U.S.C. 78c(a)(2), constitute a property 

or service ‘‘for the purpose of effecting or reporting 

a transaction on an exchange * * *.’’ 

12The capability of the workstation to initiate 

orders for commodity futures and commodity 

options and other non-security products to be sent 

to a designated contract market, FCM, IB or other 

destination that does not constitute an ‘‘exchange’’ 

(as that term is defined in Section 3(a)(1), 15 U.S.C. 

78c(a)(1), and used in Section 3(a)(2), 15 U.S.C. 

78c(a)(2), of the Act) will not constitute part of the 

‘‘facility’’ of CBOE. 

13FlexTrade is not, and, at least initially, will not 

be registered as a broker-dealer under Section 15(a) 

of the Act, 15 U.S.C. 78o. STS also will not, at least 

initially, be registered as a broker-dealer under 

Section 15(a) of the Act. In this regard, we note the 

following: (i) C2 (and/or its affiliate, CBOE) will be 

primarily responsible for the marketing of the 

PULSe workstation. In no event will FlexTrade 

have any role in marketing the PULSe workstation. 

FlexTrade will not be a party to any agreements 

with Permit Holders for the PULSe workstation. (ii) 

In contributing services to STS, FlexTrade will be 

limited to providing software and systems 

technology and maintaining proper technical 

functioning. C2 will be responsible for ensuring that 

STS’s provision of the PULSe workstation, as a 

facility of C2, meets C2’s obligations as a selfregulatory organization. (iii) Unless it becomes 

registered as a broker-dealer under Section 15(a) of 

the Act, neither STS nor FlexTrade will hold itself 

out as a broker-dealer, provide advice related to 

securities transactions, match orders, make 

decisions about routing orders, facilitate the 

clearance and settlement of executed trades, 

prepare or send transaction confirmations, screen 

counterparties for creditworthiness, hold funds or 

securities, open, maintain, administer or close 

brokerage accounts, or provide assistance in 

resolving problems, discrepancies or disputes 

related to brokerage accounts. Should STS or 

FlexTrade seek to register as a broker-dealer in the 

future, the Exchange represents that the brokerdealer would not perform any operations without 

first discussing with the Commission staff whether 

any of the broker-dealer’s operations should be 

subject to an Exchange rule filing required under 

the Act, 15 U.S.C. 78s(b)(1). 

14The Exchange notes that FlexTrade is the sole 

member of a single member limited liability 

company named FlexTrade LLC, that FlexTrade 

LLC is a registered broker-dealer, and that 

FlexTrade and FlexTrade LLC each currently makes 

a front-end order entry workstation named 

‘‘FlexTrader’’ available. FlexTrade LLC is not a 

Permit Holder of C2. 

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

16 15 U.S.C. 78f(b)(4). 

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

18 17 CFR 240.19b–4(f)(2). 

routing functionality is to be offered as 

a convenience to Permit Holders and 

would not be an exclusive means 

available to a Permit Holder to send 

orders intermarket.10

To use the PULSe workstation to 

route to other markets, a Permit Holder 

must either be a PULSe Routing 

Intermediary or establish a relationship 

with a PULSe Routing Intermediary. A 

‘‘PULSe Routing Intermediary’’ is a C2 

Permit Holder that has connectivity to, 

and is a member of, other options and/ 

or stock exchanges. If a Permit Holder 

sends an order from the PULSe 

workstation, the PULSe Routing 

Intermediary will route that order to the 

designated market on behalf of the 

entering Permit Holder. For Permit 

Holder convenience, CBOE will make 

available a list of PULSe Routing 

Intermediaries that provide third-party 

routing services. The Exchange proposes 

that each PULSe Routing Intermediary 

be charged a fee of $20 per PULSe 

workstation per month for each PULSe 

workstation that is enabled to send 

orders through that Routing 

Intermediary if another Permit Holder 

requests routing functionality through 

that Routing Intermediary. The 

Exchange is proposing that the PULSe 

Routing Intermediary fee be waived 

through December 31, 2010, thus this 

fee will be assessed beginning January 1, 

2011. 

Finally, the Exchange proposes to 

introduce a fee for non-standard 

services provided by STS. Non-standard 

services may include time and materials 

for non-standard installations of or 

modifications to PULSe to accommodate 

a Permit Holder’s use of PULSe with 

other technologies. The Exchange is 

proposing a fee of $350 per hour plus 

costs. 

The Exchange believes that the PULSe 

workstation will constitute a ‘‘facility’’ of 

C2 11 to the extent that it is used with 

respect to orders for options and other 

securities.12 A portion of the fees 

collected by C2 for the use of the 

workstation will be remitted to STS.13

The Exchange notes that FlexTrade 

engages and will engage in business 

activities in addition to its provision of 

services to STS and that these activities 

include providing other technology 

services to broker-dealers.14 The 

Exchange also notes that STS may in the 

future engage in business activities in 

addition to making the PULSe 

workstation facility available, and that 

these activities may also include the 

provision of other technology services to 

broker-dealers. In this regard: (i) There 

will be procedures and internal controls 

in place that are reasonably designed so 

that FlexTrade does not unfairly take 

advantage of confidential information 

relating to PULSe in its other business 

activities and so that STS will not 

unfairly take advantage of confidential 

information relating to PULSe to the 

extent that STS engages in any other 

business activities other than providing 

the PULSe workstation. (ii) The books, 

records, premises, officers, directors, 

agents, and employees of STS, with 

respect to the PULSe workstation, as a 

facility of C2, will be deemed to be 

those of C2 for purposes of and subject 

to oversight pursuant to the Act. (iii) 

Use of the PULSe workstation will be 

optional. Permit Holders will not be 

required to use the PULSe workstation 

to initiate their orders, and a Permit 

Holder may use any available order 

entry system that it selects, including 

one that it develops itself, for use to 

initiate its orders. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the 

Act,15 in general, and furthers the 

objectives of Section 6(b)(4) of the Act,16

in particular, in that it is designed to 

provide for the equitable allocation of 

reasonable dues, fees, and other charges 

among C2 Permit Holders in that the 

same fees and fee waivers are applicable 

to all users of the PULSe workstation. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The proposed rule change is 

designated by the Exchange as 

establishing or changing a due, fee, or 

other charge, thereby qualifying for 

effectiveness on filing pursuant to 

Section 19(b)(3)(A)(ii) of the Act 17 and 

subparagraph (f)(2) of Rule 19b–4 18

thereunder. 

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. 

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. 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 75, No. 218 / Friday, November 12, 2010 / Notices 69481 

19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Rule 12401 provides for a single, chair-qualified 

public arbitrator if the amount of the claim is not 

more than $100,000. It provides for a three 

arbitrator panel if the amount of a claim is more 

than $100,000, or is unspecified, or if the claim 

requests non-monetary damages. The parties, in 

claims of more than $25,000, but not more than 

$100,000, may agree in writing to have a three 

arbitrator panel. 

4Rule 12400(c) specifies the criteria for arbitrator 

inclusion on the chairperson roster. 

5Rule 12100(u) specifies the criteria FINRA uses 

to classify arbitrators as public. 

6Rule 12100(p) specifies the criteria FINRA uses 

to classify arbitrators as non-public. 

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–C2–2010–007 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 C2–2010–007. 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 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–C2– 

2010–007 and should be submitted on 

or before December 3, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–28418 Filed 11–10–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63250; File No. SR–FINRA– 

2010–053] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change Relating to 

Amendments to the Panel Composition 

Rule, and Related Rules, of the Code 

of Arbitration Procedure for Customer 

Disputes 

November 5, 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 

25, 2010, the Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’) 

filed with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

the proposed rule change as described 

in Items I, II, and III below, which Items 

have been prepared by FINRA. 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 

FINRA is proposing to amend the 

panel composition rule, and related 

rules, of the Code of Arbitration 

Procedure for Customer Disputes 

(‘‘Customer Code’’), to provide 

customers with the option to choose an 

all public arbitration panel in all cases. 

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA 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, 

FINRA 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. FINRA 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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Background 

Under FINRA Dispute Resolution 

rules, parties in arbitration participate 

in selecting the arbitrators who serve on 

their cases. For customer claims of more 

than $100,000, the Customer Code 

currently provides for a three arbitrator 

panel 3 comprised of a chair-qualified 

public arbitrator, 4 a public arbitrator, 5

and a non-public arbitrator.6 FINRA 

uses the computerized Neutral List 

Selection System (‘‘NLSS’’) to generate 

random lists of 10 arbitrators from each 

of these categories. The parties select 

their panel through a process of striking 

and ranking the arbitrators on the lists 

generated by NLSS. The Customer Code 

permits the parties to strike the names 

of up to four arbitrators from each list. 

The parties then rank the arbitrators 

remaining on the lists in order of 

preference. FINRA appoints the panel 

from among the names remaining on the 

lists that the parties return. 

FINRA is proposing to amend the 

Customer Code to provide customers 

with the option to choose between two 

panel selection methods—the current 

panel selection method, which would 

be labeled ‘‘Composition Rules for 

Majority Public Panel’’ (‘‘Majority Public 

Panel’’), and a new panel selection 

method, which would be labeled 

‘‘Composition Rules for Optional All 

Public Panel’’ (‘‘Optional All Public 

Panel’’). Under the proposed rule 

change, customers could choose the 

panel selection method; neither firms 

nor associated persons could choose the 

selection method. 

The Majority Public Panel option 

would continue to provide for a panel 

of one chair-qualified public arbitrator, 

one public arbitrator, and one nonpublic arbitrator, and would retain the 

current limit of four strikes for each 

arbitrator list. The new Optional All 

Public Panel provision, if chosen by the 

customer, would allow parties to select 

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