Federal Register / Vol. 75, No. 37 / Thursday, February 25, 2010 / Notices 8769 

6 15 U.S.C. 78s(b)(2). 

7 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3A Member is any registered broker or dealer that 

has been admitted to membership in the Exchange. 

See BATS Rule 1.5(n). 

4Securities Exchange Act Release No. 61260 

(December 30, 2009), 75 FR 1109 (‘‘Notice’’). 

5 In Amendment No. 1, the Exchange replaced the 

bracketed ‘‘[September 1, 2009]’’ with ‘‘[February 1, 

2010]’’ in the proposed rule text to reflect the fact 

that the current fee schedule is dated February 1, 

2010. Because the change in Amendment No. 1 is 

technical in nature, it is not subject to notice and 

comment. 

6The Exchange states that a physical port is used 

by a Member or non-member to literally plug into 

the Exchange at the data centers where the 

Exchange’s servers are located (i.e., either a crossconnection or a private line Ethernet connection to 

the Exchange’s network within the data center). 

7The Commission notes that BATS will 

implement the proposed physical port fees 

commencing on the first day of the month 

immediately following Commission approval of this 

proposed rule change (or on the date of approval, 

if on the first business day of a month). See Notice, 

supra note 4. 

8A ‘‘pair’’ of ports refers to one port at the site 

of the Exchange’s primary data center (including 

the expansion space located adjacent to such data 

center) and one port at the site of the Exchange’s 

secondary data center. 

9 In approving this proposed rule change the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

10 15 U.S.C. 78f(b)(4). 

11 15 U.S.C. 78f(b)(5). 

12 15 U.S.C. 78f(b)(8). 

13 17 CFR 242.603(a). 

result, FINRA stated that NASD IM– 

2830–2 no longer serves any useful 

purpose, and proposed not to 

incorporate its content into the 

consolidated FINRA rulebook. 

Furthermore, FINRA proposed to repeal 

Incorporated NYSE Rule 413, which 

requires members to adopt such uniform 

forms as the NYSE may prescribe to 

facilitate the orderly flow of transactions 

within the financial community. FINRA 

stated that its By-Laws contain several 

provisions by which FINRA may 

prescribe processes for members’ 

activities, including the use of uniform 

forms. Thus, FINRA stated that 

Incorporated NYSE Rule 413 is 

duplicative of these provisions and 

should be repealed. In approving this 

proposed rule change, the Commission 

notes that FINRA members and their 

associated persons are required to 

comply with all applicable Federal 

securities laws and that FINRA, as a 

self-regulatory organization, has the 

obligation to have the capacity to 

enforce compliance by its members and 

their associated persons with the Act 

and the rules and regulations 

thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,6 that the 

proposed rule change (SR–FINRA– 

2009–093) be, and it hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–3779 Filed 2–24–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61545; File No. SR–BATS– 

2009–032] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Order Approving 

Proposed Rule Change, as Modified by 

Amendment No. 1 Thereto, To Amend 

BATS Fee Schedule To Impose Fees 

for Physical Ports Used To Connect to 

BATS Exchange 

February 19, 2010. 

On December 18, 2009, BATS 

Exchange, Inc. (‘‘BATS’’ or ‘‘Exchange’’) 

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 amend the fee schedule 

applicable to Members3 and nonmembers of the Exchange to begin 

charging for certain physical ports used 

to connect to the Exchange’s systems. 

The proposed rule change was 

published for comment in the Federal 

Register on January 8, 2010.4 The 

Commission received no comments 

regarding the proposal. On February 9, 

2010, the Exchange filed Amendment 

No. 1 to the proposed rule change.5 This 

order grants approval of the proposed 

rule change, as modified by Amendment 

No. 1. 

BATS proposes to begin charging a 

monthly fee for certain physical ports6

used to connect to the Exchange’s 

system for order entry and receipt of 

data from the Exchange.7 BATS states 

that under its current policy all physical 

ports are provided free of charge but 

Members and non-members are only 

permitted to establish up to four such 

physical port pairs.8 Under the 

proposal, BATS will continue to 

provide four pairs of physical ports 

without charge to any Member or nonmember that has been approved to 

connect to the Exchange. In addition, 

the Exchange will permit Members and 

non-members to establish additional 

physical ports at a charge of $2,000 for 

each additional single physical port 

provided by the Exchange to any 

Member or non-member in any data 

center. The proposal applies to all 

Exchange constituents with physical 

connections, including Members that 

obtain ports for direct access to the 

Exchange, non-member service bureaus 

that act as a conduit for orders entered 

by Exchange Members that are their 

customers, Sponsored Participants, and 

market data recipients. 

The Exchange states that very few 

Members or non-members require four 

physical ports for their operations 

related to the Exchange or would utilize 

more than four physical ports, and thus, 

the Exchange believes that the proposal 

should not affect many of the 

Exchange’s constituents. However, the 

Exchange believes that Members and 

non-members that wish to pay for 

additional physical ports outside of 

those provided for free should have the 

ability to do so. 

The Commission has carefully 

reviewed the proposed rule change and 

finds that it is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.9

Specifically, the Commission finds that 

the proposal is consistent with Section 

6(b)(4) of the Act,10 which requires the 

equitable allocation of reasonable dues, 

fees, and other charges among Exchange 

Members and other persons using the 

Exchange’s facilities, and Section 6(b)(5) 

of the Act,11 which requires, among 

other things, that the rules of a national 

securities exchange be designed to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system and, in general, to protect 

investors and the public interest, and 

not be designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. The 

Commission also finds that the 

proposed rule change is consistent with 

Section 6(b)(8) of the Act,12 which 

requires that the rules of an exchange 

not impose a burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. Finally, the 

Commission finds that the proposed 

rule change is consistent with Rule 

603(a) of Regulation NMS,13 which 

requires an exclusive processor that 

distributes information with respect to 

quotations for or transactions in an NMS 

stock to do so on terms that are fair and 

reasonable and not unreasonably 

discriminatory. 

The Commission believes that the 

proposed physical port fees are 

equitably allocated among Members and 


jlentini on DSKJ8SOYB1PROD with NOTICES
8770 Federal Register / Vol. 75, No. 37 / Thursday, February 25, 2010 / Notices 

14See Securities Exchange Act Release No. 59039 

(December 2, 2008), 73 FR 74770 (December 9, 

2008) (SR–NYSEArca–2006–21). 

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

16 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The current FINRA rulebook consists of 

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

incorporated from the New York Stock Exchange 

(‘‘Incorporated NYSE Rules’’) (together, the NASD 

Rules and Incorporated NYSE Rules are referred to 

as the ‘‘Transitional Rulebook’’). 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 (‘‘Dual Members’’). 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). 

4For convenience, the Incorporated NYSE Rules 

are referred to as the ‘‘NYSE Rules.’’ 

5NYSE Rule 405(4) was adopted by the NYSE in 

the late 1960’s. In 1977, the NYSE proposed 

amendments to Rule 405(4) to define the term 

‘‘isolated’’ to mean ‘‘not exceeding five $2,000 

transactions during any twelve-month period unless 

otherwise approved by the NYSE,’’ and to allow 

unsolicited purchases as well as sales of securities. 

In late 1977, the SEC instituted proceedings to 

determine whether to disapprove the proposed rule 

change and identified the potential grounds for 

disapproval. See Securities Exchange Act Release 

No. 14143 (November 7, 1977) (Order Instituting 

Proceedings to Determine Whether Proposed 

Changes to Rule 405 Should be Disapproved; File 

No. SR–NYSE–76–34). The SEC expressed concern 

that ‘‘execution of such transactions, and in 

particular of purchases [as proposed], in the 

common purchase and sale account may permit 

opportunities for fraudulent and manipulative acts 

or practices[.]’’ In February 1978, the NYSE 

withdrew the filing. See Securities Exchange Act 

Release No. 14630 (April 3, 1978) (Order Approving 

Withdrawal of NYSE’s Proposed Changes to Rule 

405; File No. SR–NYSE–76–34). 

6FINRA notes that in the event a member may 

seek permission not to send customer account 

statements under certain limited circumstances, 

proposed FINRA Rule 2231 which relates to 

customer account statements, would authorize 

FINRA to exempt members from the provisions of 

such rule, including the requirement to deliver 

periodic account statements, pursuant to the Rule 

9600 Series. See Securities Exchange Act Release 

No. 59921 (May 14, 2009), 74 FR 23912 (May 21, 

2009) (Notice of Filing; File No. SR–FINRA–2009– 

028). 

non-members and do not unfairly or 

unreasonably discriminate between 

customers, issuers, brokers, or dealers 

because the proposed physical port fees 

do not distinguish among the type of 

participant but rather are the same for 

all Members and non-members. The 

Commission also believes that BATS 

was subject to significant competitive 

pressure to act equitably, fairly, and 

reasonably in setting the physical port 

fees, in light of the highly competitive 

nature of the market for execution and 

routing services.14

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,15 that the 

proposed rule change (SR–BATS–2009– 

032), as modified by Amendment No. 1 

thereto, be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–3822 Filed 2–24–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61543; File No. SR–FINRA– 

2010–005] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change To Repeal 

Incorporated NYSE Rule 405(4) 

(Common Sales Accounts) 

February 18, 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 January 21, 2010, 

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 repeal 

Incorporated NYSE Rule 405(4) 

(Common Sales Accounts) as part of the 

process to develop the consolidated 

FINRA rulebook. 

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 

As part of the process of developing 

a new consolidated rulebook 

(‘‘Consolidated FINRA Rulebook’’),3

FINRA is proposing to repeal NYSE 

Rule 405(4) (Common Sales Accounts).4

NYSE Rule 405(4) (Common Sales 

Accounts) requires proper supervision 

of registered representatives handling 

common sales accounts. The rule 

provides that a member may facilitate 

the isolated liquidation of securities 

valued at $1,000 or less registered in the 

name of an individual who does not 

have an account, and which are not part 

of any distribution, through a common 

sales account set up for the specific 

purpose of handling such sales. The rule 

further provides that such sales may be 

effected on behalf of the customer 

without requiring the member to send a 

periodic customer account statement to 

the individual as otherwise generally 

required, provided the following 

conditions are satisfied: (1) The 

customer is identified as the individual 

in whose name the securities are 

registered; (2) the securities are received 

by the member, at or prior to the time 

of the entry of the order, in the exact 

amount to be sold in good delivery 

form; (3) a confirmation is sent to the 

customer; (4) all proceeds of such sales 

are paid out on or immediately 

following settlement date; and (5) a 

record is made in the common sales 

account that includes certain customerspecific information. 

FINRA believes that the rule as 

written may raise potential investor 

protection concerns. The term ‘‘isolated’’ 

is not defined.5 Further, NYSE Rule 

405(4) permits a member to effect sales 

of securities for customers without 

expressly requiring prior customer 

consent and without the need to send 

periodic account statements to the 

customer. For these reasons, FINRA 

proposes to eliminate NYSE Rule 405(4) 

and not adopt its content into the 

Consolidated FINRA Rulebook.6

FINRA will announce the 

implementation date of the proposed 

rule change in a Regulatory Notice to be 

published no later than 90 days 

following Commission approval. The 

implementation date will be no later 

than 180 days following Commission 

approval. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 


jlentini on DSKJ8SOYB1PROD with NOTICES