Federal Register / Vol. 75, No. 40 / Tuesday, March 2, 2010 / Notices 9455 

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

2 17 CFR 240.19b–4. 3See BATS Rule 1.5(n). 

added, deleted or postponed, please 

contact: 

The Office of the Secretary at (202) 

551–5400. 

Dated: February 25, 2010. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–4333 Filed 2–26–10; 11:15 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[File No. 500–1] 

U.S. Biomedical Corp., (f/k/a United 

Textiles & Toys, Inc.), U.S. 

Environmental Solutions, Inc. (n/k/a 

EnviroResolutions, Inc.), USA Bridge 

Construction of N.Y., Inc., USA 

Broadband, Inc., USA Uranium Corp., 

and Utopia Marketing, Inc. (n/k/a 

Daytonabrands, Inc.); Order of 

Suspension of Trading 

February 26, 2010. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of U.S. 

Biomedical Corp. (f/k/a United Textiles 

& Toys, Inc.) because it has not filed any 

periodic reports since the period ended 

December 31, 2002. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of U.S. 

Environmental Solutions, Inc. (n/k/a 

EnviroResolutions, Inc.) because it has 

not filed any periodic reports since the 

period ended March 31, 1996. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of USA Bridge 

Construction of N.Y., Inc. because it has 

not filed any periodic reports since the 

period ended September 30, 1998. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of USA 

Broadband, Inc. because it has not filed 

any periodic reports since the period 

ended December 31, 2003. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of USA 

Uranium Corp. because it has not filed 

any periodic reports since the period 

ended February 29, 2008. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Utopia 

Marketing, Inc. (n/k/a Daytonabrands, 

Inc.) because it has not filed any 

periodic reports since the period ended 

September 30, 2000. 

The Commission is of the opinion that 

the public interest and the protection of 

investors require a suspension of trading 

in the securities of the above-listed 

companies. 

Therefore, it is ordered, pursuant to 

Section 12(k) of the Securities Exchange 

Act of 1934, that trading in the 

securities of the above-listed companies 

is suspended for the period from 9:30 

a.m. EST on February 26, 2010, through 

11:59 p.m. EST on March 11, 2010. 

By the Commission. 

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2010–4375 Filed 2–26–10; 4:15 pm] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61574; File No. SR–BATS– 

2010–003] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Order Granting Accelerated Approval 

of Proposed Rule Change To Amend 

BATS Rule 5.5, Entitled ‘‘Information 

Barrier Procedures,’’ and To Add New 

BATS Rule 12.13, Entitled ‘‘Trading 

Ahead of Research Reports’’ 

February 23, 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 February 

11, 2010, BATS Exchange, Inc. (‘‘BATS’’ 

or the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by BATS. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons and is 

approving the proposed rule change on 

an accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is proposing to amend 

BATS Rule 5.5, entitled ‘‘Information 

Barrier Procedures,’’ to modify the 

Exchange’s rule regarding information 

barrier procedures required of certain 

Exchange Members. The Exchange is 

also proposing to add new Exchange 

Rule 12.13, entitled ‘‘Trading Ahead of 

Research Reports.’’ 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at http://www.batstrading.com, at the 

principal office of the Exchange, 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, 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 III 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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to eliminate 

the requirements of BATS Rule 5.5 that 

require a Member 3 that trades for its 

own account or that has a specialist or 

market maker operation on another 

market (defined in BATS Rule 5.5(a) as 

a ‘‘specialist’’) to establish and maintain 

certain specifically prescribed 

information barrier procedures and to 

file such procedures with the Exchange. 

At the same time, the Exchange 

proposes to amend BATS Rule 5.5 to 

more closely mirror the rules of other 

self-regulatory organizations that create 

certain obligations for all Member firms 

related to the prevention of the misuse 

of material, non-public information. 

Finally, the Exchange proposes to add 

new BATS Rule 12.13, which: (i) 

Prohibits Members from trading ahead 

of research reports, and (ii) requires 

each Member to establish, maintain and 

enforce procedures regarding the flow of 

information between research 

department personnel and trading 

department personnel. 

(i) All Members Must Maintain Policies 

Concerning the Misuse of Material NonPublic Information 

Presently, the Exchange requires that 

each Member establish, maintain and 

enforce written policies and procedures 

reasonably designed to prevent the 

misuse of material, non-public 

information, which includes review of 

employee and proprietary trading, 

memorialization and documentation of 

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9456 Federal Register / Vol. 75, No. 40 / Tuesday, March 2, 2010 / Notices 

4See BATS Rule 5.5(a). 

5See BATS Rule 12.6. 

6Such examples include: (a) Trading in any 

securities issued by a corporation, or in any related 

securities or related options or other derivative 

securities, while in possession of material, nonpublic information concerning that issuer; or (b) 

Trading in a security or related options or other 

derivative securities, while in possession of 

material non-public information concerning 

imminent transactions in the security or related 

securities; or (c) Disclosing to another person or 

entity any material, non-public information 

involving a corporation whose shares are publicly 

traded or an imminent transaction in an underlying 

security or related securities for the purpose of 

facilitating the possible misuse of such material, 

non-public information. 

7The specific policies and procedures required, 

at a minimum, would include: (a) All associated 

persons of the Member must be advised in writing 

of the prohibition against the misuse of material, 

non-public information; and (b) All associated 

persons of the Member must sign attestations 

affirming their awareness of, and agreement to 

abide by the aforementioned prohibitions. These 

signed attestations must be maintained for at least 

three years, the first two years in an easily 

accessible place; and (c) Each Member must receive 

and retain copies of trade confirmations and 

monthly account statements for each account in 

which an associated person: Has a direct or indirect 

financial interest or makes investment decisions. 

The activity in such brokerage accounts should be 

reviewed at least quarterly by the Member for the 

purpose of detecting the possible misuse of 

material, non-public information; and (d) All 

associated persons must disclose to the Member 

whether they, or any person in whose account they 

have a direct or indirect financial interest, or make 

investment decisions, are an officer, director or 

10% shareholder in a company whose shares are 

publicly traded. Any transaction in the stock (or 

option thereon) of such company shall be reviewed 

to determine whether the transaction may have 

involved a misuse of material non-public 

information. 

8Securities Exchange Act Release No. 60604 

(September 1, 2009), 74 FR 46272 (September 8, 

2009) (SR–NYSEArca–2009–78). 

9The Exchange represents that it will issue a 

Regulatory Circular to its Members notifying such 

Members of this proposal and addressing related 

regulatory topics. For instance, the Regulatory 

Circular will reinforce the requirement that 

Members of the Exchange maintain policies and 

procedures that are reasonably designed to assure 

compliance with applicable securities laws, rules, 

regulations and statements of policy promulgated 

thereunder and the Exchange’s rules, including 

those relating to the misuse of material non-public 

information. In addition, the Exchange represents 

that the Regulatory Circular will include the 

following guidance: ‘‘Pursuant to the proposed rule 

change, Members may utilize a flexible, principlesbased approach to modify their policies and 

procedures as appropriate to reflect changes to their 

business model, business activities, or to the 

securities market itself. A Member should be 

proactive in assuring that its policies and 

procedures reflect the current state of its business 

and continue to be reasonably designed to achieve 

compliance with applicable federal securities law 

and regulations, and with applicable Exchange 

rules. While information barriers are not 

specifically required under the proposal, a 

Member’s business model or business activities may 

dictate that an information barrier or a functional 

separation be part of the appropriate set of policies 

and procedures that would be reasonably designed 

to achieve compliance with applicable securities 

law and regulations, and with applicable Exchange 

rules.’’ 

procedures, substantive supervision of 

interdepartmental communications by 

the Member’s compliance department 

and procedures concerning proprietary 

trading when the firm is in possession 

of material, non-public information.4

The Exchange also has specific rules 

prohibiting Members from 

disadvantaging their customers or other 

market participants by improperly 

capitalizing on the Members’ access to 

or receipt of material, non-public 

information. For example, the Exchange 

prohibits a Member from trading ahead 

of its customer’s limit orders.5

(ii) Proposed Amendments to General 

Standards and Deletion of Specific 

Information Barrier Procedures 

As noted above, the Exchange 

currently maintains a general standard 

for all Members to establish, maintain 

and enforce written policies and 

procedures reasonably designed to 

prevent the misuse of material, nonpublic information, including certain 

specific procedures. The Exchange also 

currently requires specific information 

barrier procedures for Members that 

meet the definition in BATS Rule 5.5(a) 

of a ‘‘specialist’’ and requires such firms 

to file their information barrier 

procedures with the Exchange. The 

Exchange proposes amending the 

language that imposes the general 

standard of preventing the misuse of 

material, non-public information and 

adding additional language to provide 

clarity regarding the minimum policies 

and procedures a Member must 

implement to comply with such general 

standards. As described in further detail 

below, the Exchange also proposes 

deleting the specific information barrier 

procedures required to be maintained by 

Exchange Members that meet the 

definition of ‘‘specialist.’’ 

Under the proposal, amended BATS 

Rule 5.5 would provide flexibility to a 

BATS Member to develop and maintain 

procedures and controls to prevent the 

misuse of material, non-public 

information that are effective and 

appropriate to that Member. The 

Exchange proposes adding 

Interpretation and Policy .01 to BATS 

Rule 5.5 that would provide examples of 

conduct that would constitute the 

misuse of material, non-public 

information.6 Proposed Interpretation 

and Policy .02 to BATS Rule 5.5 would 

set forth specific policies and 

procedures that would be required of 

Members.7 However, as made clear by 

the proposed Interpretation and Policy, 

such policies and procedures would not 

in all cases, satisfy the requirements and 

intent of amended BATS Rule 5.5; the 

adequacy of each Member’s policies and 

procedures would depend upon the 

nature of such Member’s business. 

The Exchange proposes to eliminate, 

in their entirety, the requirements set 

forth in BATS Rule 5.5 that require 

certain members to maintain and file 

with the Exchange specifically 

prescribed information barrier 

procedures. This proposal is consistent 

with the change recently approved by 

the Commission for NYSE Arca 

Equities, Inc. (‘‘NYSE Arca’’), which 

allowed the elimination of a specific 

information barrier requirement 

previously contained in NYSE Arca 

rules.8 This proposal is also consistent 

with the approach currently employed 

by the Nasdaq Stock Market, L.L.C. 

(‘‘Nasdaq’’), which does not generally 

require its members to establish or 

maintain information barriers. 

If the deletion of the requirement to 

maintain and file with the Exchange 

certain prescribed information barrier 

procedures is approved, the only 

specific information barrier requirement 

of the Exchange will be the requirement 

described below, under proposed Rule 

12.13, to maintain policies and 

procedures reasonably designed to 

restrict or limit the information flow 

between those with knowledge of the 

content or timing of a research report 

and trading department personnel. 

However, the Exchange does not intend 

to indicate that information barriers may 

not be necessary for Members in other 

contexts. To the contrary, information 

barrier procedures may be a necessary 

or effective means to manage conflicts of 

interest or to prevent communications 

of material non-public information 

between certain individuals or groups.9

Further, as described above, under 

proposed Interpretation and Policy .02, 

the adequacy of each Member’s policies 

and procedures will depend upon the 

nature of each Member’s business. 

(iii) Proposed Addition of BATS Rule 

12.13 

In an attempt to achieve additional 

consistency with certain other market 

centers, the Exchange further proposes 

to add new BATS Rule 12.13, 

prohibiting Members from establishing, 

increasing, decreasing or liquidating an 

inventory position in a security or a 

derivative of such security based on 

non-public advance knowledge of the 

content or timing of a research report in 

that security. Similar to FINRA Rule 

5280 and NYSE Arca Rule 6.7, the 

Exchange also proposes to require 

Members to establish, maintain and 

enforce procedures reasonably designed 

to restrict or limit the information flow 

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Federal Register / Vol. 75, No. 40 / Tuesday, March 2, 2010 / Notices 9457 

10See Securities Exchange Act Release No. 60604 

(September 1, 2009), 74 FR at 46275 (September 8, 

2009) (SR–NYSEArca–2009–78). 

11See Nasdaq Rules 2110–2, 2110–3, and 2110– 

4. 

12See 15 U.S.C. 78o(b)(8); see also 17 CFR 

240.15b9–1(a). 

13BATS notes that its current examination 

procedure regarding its review for appropriate 

supervisory systems and procedures will remain in 

place. 

14 15 U.S.C. 78f(b). 

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

between research department personnel 

and trading department personnel, so as 

to prevent trading department personnel 

from utilizing non-public advance 

knowledge of the issuance or content of 

a research report. 

(iv) Members Retain Responsibility for 

Compliance 

By prohibiting the misuse of material, 

non-public information, the Exchange 

believes it has appropriately defined the 

behavior that its participants must 

avoid. However, the Exchange also 

believes that prescribing the form that 

these policies and procedures must take 

is unnecessarily burdensome. By 

defining certain prohibited behavior 

(e.g., BATS Rule 12.6) the Exchange has 

placed its participants on notice as to 

their specific compliance burdens with 

respect to preventing the misuse of 

material, non-public information. 

Further, BATS Rule 5.1 requires each 

Member to establish, maintain and 

enforce written procedures that enable 

such Member to supervise the activities 

of associated persons of the Member and 

to assure their compliance with 

applicable securities laws and 

regulations, and with BATS Rules. 

Pursuant to this proposed rule change, 

Members may utilize a flexible, 

principles-based approach to modify 

their policies and procedures as 

appropriate to reflect changes to their 

business model, business activities, or 

to the securities market itself. A Member 

should be proactive in assuring that its 

policies and procedures reflect the 

current state of its business and 

continue to be reasonably designed to 

achieve compliance with applicable 

federal securities law and regulations, 

and with applicable Exchange rules. In 

addition, in the context of approving a 

similar proposal by NYSE Arca, the 

Commission stated that, ‘‘while 

information barriers are not specifically 

required under the proposal, a [firm’s] 

business model or business activities 

may dictate that an information barrier 

or a functional separation be part of the 

appropriate set of policies and 

procedures that would be reasonably 

designed to achieve compliance with 

applicable securities law and 

regulations, and with applicable 

Exchange rules.’’ 10

(v) Comparison to Framework Employed 

by Nasdaq and NYSE Arca 

By amending its rules in accordance 

with this proposal, the Exchange 

reinforces a regulatory structure that 

clearly identifies prohibited conduct 

(e.g., misuse of material, non-public 

information) without further requiring 

Members to establish and maintain 

specific compliance mechanisms (e.g., 

information barriers). For example, 

Nasdaq prohibits the misuse of material, 

non-public information but does not 

generally require that its members 

establish and maintain information 

barriers,11 and NYSE Arca recently 

eliminated a requirement applicable to 

NYSE Arca market makers specifically 

requiring information barriers. In 

conjunction with such amendment, 

NYSE Arca adopted NYSE Arca Rule 

6.7, a rule that the Exchange has 

mirrored with its proposal of BATS Rule 

12.13. Finally, similar to BATS Rule 5.1, 

Nasdaq Rule 3010 and NYSE Arca Rule 

6.18 require the members of Nasdaq and 

NYSE Arca, respectively, to establish 

and maintain systems to supervise the 

activities of associated persons that are 

reasonably designed to achieve 

compliance with applicable federal 

securities laws and regulations, and the 

applicable rules of the exchange. 

The Exchange believes that the 

approach proposed herein is consistent 

with Nasdaq and NYSE Arca’s 

respective structures. First, like Nasdaq 

and NYSE Arca, market makers 

registered with BATS and other firms 

that are Members of BATS that trade for 

their own accounts do not have any 

advantages regarding relevant trading 

information provided by the Exchange, 

either at, or prior to, the point of 

execution vis-a`-vis other market 

participants. Second, BATS has similar 

requirements to Nasdaq and NYSE Arca 

concerning the maintenance of a 

supervisory system and written 

supervisory procedures. The Exchange 

notes that FINRA and BATS have 

previously acknowledged, pursuant to 

the provisions of Rule 17d–2 under the 

Securities Exchange Act of 1934 (‘‘17d– 

2 Agreement’’), that, collectively, BATS 

Rules 5.1, 5.2, 5.3 and 5.4 are 

substantially similar to FINRA’s NASD 

Rule 3010, which Nasdaq and NYSE 

Arca rules incorporate by reference. For 

instance, BATS Rule 5.4 is similar to 

Rule 3010(c), which requires each 

FINRA member to conduct an annual 

review of the businesses in which it 

engages and to conduct annual office 

inspections including the ‘‘periodic 

examination of customer accounts to 

detect and prevent irregularities or 

abuses.’’ Although the Exchange has not 

incorporated Rule 3010(c) into its Rules 

by reference, Rule 3010(c) would apply 

to all broker-dealers that engage in a 

customer business, because such firms 

are required to be members of FINRA.12

Also, although not as detailed as Rule 

3010(c) with respect to the requirements 

of the inspection, BATS Rule 5.4 is 

nearly identical in that it requires BATS 

Members to ‘‘review the activities of 

each office, which shall include the 

periodic examination of customer 

accounts to detect and prevent 

irregularities or abuses.’’ 

Based on the foregoing, it is 

appropriate for the Exchange to 

establish a similar approach with 

respect to information barriers 

employed by Nasdaq and NYSE Arca.13

(vi) Conclusion: Flexibility and 

Accountability 

Eliminating substantial portions of 

BATS Rule 5.5, and adding to the 

general standards set forth therein to 

prohibit the misuse of material, nonpublic information, as proposed by this 

filing, offers Exchange participants both 

certainty and flexibility. BATS Members 

are on notice as to their obligations to 

maintain and enforce written policies 

and procedures reasonably designed to 

prevent the misuse of material, nonpublic information. Like Nasdaq and 

NYSE Arca participants, BATS 

Members will now be afforded the same 

flexibility to maintain compliance 

mechanisms of their own design. The 

Exchange believes that this approach 

fosters a fair and orderly marketplace 

without being overly burdensome upon 

its Members. 

2. Statutory Basis 

The rule change proposed in this 

submission is consistent with the 

requirements of the Act and the rules 

and regulations thereunder that are 

applicable to a national securities 

exchange, and, in particular, with the 

requirements of Section 6(b) of the 

Act.14 Specifically, the proposed change 

is consistent with Section 6(b)(5) of the 

Act,15 because it is designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, and remove 

impediments to, and perfect the 

mechanism of, a free and open market 

and a national market system. 

Eliminating portions of BATS Rule 5.5 

that prescribe specific procedures and 

information barriers that must be 

maintained by certain Member firms, 

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9458 Federal Register / Vol. 75, No. 40 / Tuesday, March 2, 2010 / Notices 

16 15 U.S.C. 78o(f). 

17See Securities Exchange Act Release 58806 

(October 17, 2008), 73 FR 63216 (October 23, 2008); 

Securities Exchange Act Release No. 58536 

(September 12, 2008), 73 FR 54646 (September 22, 

2008). 

18 In approving this rule change, the Commission 

notes that it has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

19 15 U.S.C. 78f(b)(5). 

20See Securities Exchange Act Release No. 58328 

(August 7, 2008), 73 FR 48260 (August 18, 2008) 

(SR–NYSE–2008–45) (articulating concerns in the 

context of approving changes to NYSE Rule 98). 

while establishing more clarity 

regarding the minimum procedures that 

must be maintained by any Member, 

consistent with other self-regulatory 

organizations, should eliminate 

unnecessary regulatory burdens while at 

the same time retaining an appropriate 

mechanism designed to ensure that 

material, non-public information 

continues to be protected. In particular, 

the proposed rule change will reduce 

the burdens on certain Members that are 

currently required to maintain, and file 

with the Exchange, specified 

information barriers. The Exchange 

believes that the proposed changes will 

make compliance obligations with 

respect to prevention of the misuse of 

material, non-public information more 

clear to Exchange Members. The 

amended rule structure will be more 

consistent with that of other exchanges 

and will nonetheless continue to ensure 

protection of investors through existing 

regulations relevant to misuse of 

material, non-public information that 

apply to Exchange Members through the 

applicability and enforcement of 

relevant provisions of the Act, including 

Section 15(f); 16 rules imposed by other 

self-regulatory organizations; a joint 

industry effort to surveil for potential 

insider trading violations through a Rule 

17d–2 Agreement17 and Regulatory 

Services Agreements between all selfregulatory organizations that trade 

equity securities; and through the 

Exchange’s examination program. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change imposes any 

burden on competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

The Exchange has neither solicited 

nor received written comments on the 

proposed rule change. 

III. 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–BATS–2010–003 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 SR–BATS–2010–003. 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 BATS. 

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 publicly available. All 

submissions should refer to File 

Number SR–BATS–2010–003 and 

should be submitted on or before March 

23, 2010. 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of the 

Proposed Rule Change 

After careful consideration, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.18 The 

Commission believes that the proposal 

is consistent with Section 6(b)(5) 19 in 

particular, in that it is designed to 

prevent fraudulent and manipulative 

acts and practices, promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, 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. 

The Exchange is proposing to amend 

BATS Rule 5.5 to replace the 

specifically prescribed information 

barrier requirement with a more 

principles-based approach that would 

permit a Member to develop and apply 

its own policies and procedures to, 

among other things, prohibit the misuse 

of material nonpublic information. 

BATS Rule 5.5 addresses concerns 

arising from the potential for the sharing 

of material non-public information 

between a Member’s market making 

activities and other business activities of 

the Member or its affiliates. For 

instance, one such concern is that the 

Member or affiliate engaging in other 

business activities might use non-public 

information that was acquired by the 

Member through its role as a market 

maker. Another concern is that the 

Member might use material non-public 

information received from the entity 

engaging in other business activities, 

such as trading based on a change in the 

firm’s buy or sell recommendation.20

While amended BATS Rule 5.5 will 

no longer specify policies and 

procedures a Member must establish, 

the proposal will require that the 

policies and procedures be reasonably 

designed to ensure compliance with 

applicable Federal securities law and 

regulations, and with Exchange rules. 

The Commission believes that, with 

adequate oversight by the Exchange of 

its members, elimination of prescriptive 

information barrier requirements should 

not reduce the effectiveness of BATS 

rules requiring Members to establish 

and maintain systems to supervise the 

activities of Members, and written 

procedures that are reasonably designed 

to comply with applicable securities 

laws and Exchange rules, including the 

prohibition on misuse of material 

nonpublic information. 

Specifically, amended BATS Rule 5.5 

will require Members to establish, 

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21See BATS Rule 5.5, Commentary .01. 

22 15 U.S.C. 78s(b)(2). 

23See Securities Exchange Act Release No. 53128 

(Jan. 13, 2006), 71 FR 3550 (January 23, 2006) 

(adopting Nasdaq IM–2110–2; IM–2110–3; IM– 

2110–4, and Rule 3010); 60604 (September 1, 2009), 

74 FR 46272 (September 8, 2009) (SR–NYSEArca– 

2009–78). 

24 15 U.S.C. 78s(b)(2). 25 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 If this proposed rule change is approved by the 

Commission, the By-Laws of NASD Dispute 

Resolution will be redesignated as the ‘‘By-Laws of 

FINRA Dispute Resolution.’’ 

maintain and enforce written 

procedures reasonably designed to 

prevent the misuse of material nonpublic information by the Member or 

persons associated with the Member. 

The misuse of material non-public 

information includes trading in a 

security or related securities or options 

or other derivative securities, while in 

possession of material non-public 

information concerning the issuer, or 

while in possession of material nonpublic information concerning 

imminent transactions in the security or 

related securities.21 The Exchange also 

proposes to add BATS Rule 12.13, 

which will prohibit a Member from 

establishing, increasing, decreasing or 

liquidating an inventory position in a 

security or derivative of that security 

based on advance non-public 

knowledge of the content or timing of a 

research report concerning that security. 

Further, BATS Rules 5.1, 5.2, 5.3 and 

5.4, which relate to a Member’s 

responsibilities or obligations related to 

conduct or supervision, will continue to 

apply. For example, BATS Rule 5.1 

requires BATS Members to ‘‘establish, 

maintain and enforce written 

procedures which will enable it to 

supervise properly the activities of 

associated persons of the Member and to 

assure their compliance with applicable 

securities laws, rules, regulations and 

statements of policy promulgated 

thereunder, with the rules of the 

designated self-regulatory organization, 

where appropriate, and with Exchange 

Rules.’’ In addition, BATS Rule 5.4 

requires BATS Members to ‘‘review the 

activities of each office, which shall 

include the periodic examination of 

customer accounts to detect and prevent 

irregularities or abuses.’’ These rules 

thus provide additional clarification 

that the supervisory systems and 

internal inspections of Members must 

be reasonably designed to achieve 

compliance with applicable securities 

laws and regulations and with 

applicable BATS rules, including those 

relating to the misuse of material nonpublic information. 

Pursuant to this proposal rule change, 

Members may utilize the flexible, 

principles-based approach to modify 

their policies and procedures as 

appropriate to reflect changes to their 

business model, business activities, or 

to the securities market itself. A Member 

should be proactive in assuring that its 

policies and procedures reflect the 

current state of its business and 

continue to be reasonably designed to 

achieve compliance with applicable 

federal securities law and regulations, 

and with applicable Exchange rules. In 

addition, the Commission notes that, 

while information barriers are not 

specifically required under the 

proposal, a Member’s business model or 

business activities may dictate that an 

information barrier or a functional 

separation be part of the appropriate set 

of policies and procedures that would 

be reasonably designed to achieve 

compliance with applicable securities 

law and regulations, and with 

applicable Exchange rules. In this 

regard, the Exchange included in 

Interpretation and Policy .02 to 

amended BATS Rule 5.5 a statement 

that the adequacy of each Member’s 

policies and procedures relating to the 

misuse of material non-public 

information will depend upon the 

nature of such Member’s business. 

The Commission believes that the 

regulatory approach in this proposed 

rule change is substantially similar to 

the regulatory approach of Nasdaq and 

NYSE Arca. In particular, the BATS 

approach, like the Nasdaq and NYSE 

Arca approach, (i) enumerates the 

conduct that is prohibited by its 

members, including the potential 

misuse of material non-public 

information and (ii) provides for the 

policies and procedures that must be 

reasonably designed to ensure 

compliance with the same. In addition, 

the Commission notes that the Exchange 

has represented that its current 

examination procedure for the review of 

appropriate supervisory systems and 

procedures will remain in place. 

The Commission also finds good 

cause, pursuant to Section 19(b)(2) of 

the Act,22 for approving the proposed 

rule change prior to the 30th day after 

the date of publication of notice in the 

Federal Register. Although this 

proposed rule change does not require 

that Members maintain specificallyprescribed information barriers, it will 

continue to mandate that Members 

establish and maintain a set of policies 

and procedures reasonably designed to 

achieve compliance with applicable 

securities law and regulations, and with 

applicable Exchange rules. As such, the 

Exchange is adopting an approach that 

is substantially similar to the approach 

currently employed by Nasdaq and 

NYSE Arca.23

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,24 that the 

proposed rule change (SR–BATS–2010– 

003) be, and it hereby is, approved on 

an accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.25

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–4230 Filed 3–1–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61575; File No. SR–FINRA– 

2010–007] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change To Amend the 

By-Laws of NASD Dispute Resolution 

February 23, 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 Financial Industry 

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

(f/k/a National Association of Securities 

Dealers, Inc. (‘‘NASD’’)) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) on January 22, 

2010, the proposed rule change as 

described in Items I, II, and III below, 

which Items have been substantially 

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 ByLaws of NASD Dispute Resolution.3

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 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES