[Federal Register Volume 75, Number 42 (Thursday, March 4, 2010)]
[Notices]
[Pages 9970-9976]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4455]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61588; File No. 4-551]


Program for Allocation of Regulatory Responsibilities Pursuant to 
Rule 17d-2; Notice of Filing and Order Approving and Declaring 
Effective an Amendment to the Plan for the Allocation of Regulatory 
Responsibilities Among the NYSE Amex LLC, BATS Exchange, Inc., C2 
Options Exchange, Incorporated, the Chicago Board Options Exchange, 
Incorporated, the International Securities Exchange, LLC, Financial 
Industry Regulatory Authority, Inc., the NYSE Arca, Inc., The NASDAQ 
Stock Market LLC, NASDAQ OMX BX, Inc., and NASDAQ OMX PHLX, Inc. 
Concerning Options-Related Market Surveillance

February 25, 2010.
    Notice is hereby given that the Securities and Exchange Commission 
(``Commission'') has issued an Order, pursuant to Section 17(d) of the 
Securities Exchange Act of 1934 (``Act''),\1\ approving and declaring 
effective an amendment to the plan for allocating regulatory 
responsibility (``Plan'') filed pursuant to Rule 17d-2 of the Act,\2\ 
by the NYSE Amex LLC (``Amex''), BATS Exchange, Inc. (``BATS''), C2 
Options Exchange, Incorporated (``C2''), the Chicago Board Options 
Exchange, Incorporated (``CBOE''), the International Securities 
Exchange LLC (``ISE''), Financial Industry Regulatory Authority, Inc. 
(``FINRA''), NYSE Arca, Inc. (``Arca''), The NASDAQ Stock Market LLC 
(``NASDAQ''), NASDAQ OMX BX, Inc. (``BX'') and NASDAQ OMX PHLX, Inc. 
(``Phlx'') (collectively, ``SRO participants'').
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    \1\ 15 U.S.C. 78q(d).
    \2\ 17 CFR 240.17d-2.
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I. Introduction

    Section 19(g)(1) of the Act,\3\ among other things, requires every 
self-regulatory organization (``SRO'') registered as either a national 
securities exchange or national securities association to examine for, 
and enforce compliance by, its members and persons associated with its 
members with the Act, the rules and regulations thereunder, and the 
SRO's own rules, unless the SRO is relieved of this responsibility 
pursuant to Section 17(d) \4\ or Section 19(g)(2) \5\ of the Act. 
Without this relief, the statutory

[[Page 9971]]

obligation of each individual SRO could result in a pattern of multiple 
examinations of broker-dealers that maintain memberships in more than 
one SRO (``common members''). Such regulatory duplication would add 
unnecessary expenses for common members and their SROs.
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    \3\ 15 U.S.C. 78s(g)(1).
    \4\ 15 U.S.C. 78q(d).
    \5\ 15 U.S.C. 78s(g)(2).
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    Section 17(d)(1) of the Act \6\ was intended, in part, to eliminate 
unnecessary multiple examinations and regulatory duplication.\7\ With 
respect to a common member, Section 17(d)(1) authorizes the Commission, 
by rule or order, to relieve an SRO of the responsibility to receive 
regulatory reports, to examine for and enforce compliance with 
applicable statutes, rules, and regulations, or to perform other 
specified regulatory functions.
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    \6\ 15 U.S.C. 78q(d)(1).
    \7\ See Securities Act Amendments of 1975, Report of the Senate 
Committee on Banking, Housing, and Urban Affairs to Accompany S. 
249, S. Rep. No. 94-75, 94th Cong., 1st Session 32 (1975).
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    To implement Section 17(d)(1), the Commission adopted two rules: 
Rule 17d-1 and Rule 17d-2 under the Act.\8\ Rule 17d-1 authorizes the 
Commission to name a single SRO as the designated examining authority 
(``DEA'') to examine common members for compliance with the financial 
responsibility requirements imposed by the Act, or by Commission or SRO 
rules.\9\ When an SRO has been named as a common member's DEA, all 
other SROs to which the common member belongs are relieved of the 
responsibility to examine the firm for compliance with the applicable 
financial responsibility rules. On its face, Rule 17d-1 deals only with 
an SRO's obligations to enforce member compliance with financial 
responsibility requirements. Rule 17d-1 does not relieve an SRO from 
its obligation to examine a common member for compliance with its own 
rules and provisions of the Federal securities laws governing matters 
other than financial responsibility, including sales practices and 
trading activities and practices.
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    \8\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2, respectively.
    \9\ See Securities Exchange Act Release No. 12352 (April 20, 
1976), 41 FR 18808 (May 7, 1976).
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    To address regulatory duplication in these and other areas, the 
Commission adopted Rule 17d-2 under the Act.\10\ Rule 17d-2 permits 
SROs to propose joint plans for the allocation of regulatory 
responsibilities with respect to their common members. Under paragraph 
(c) of Rule 17d-2, the Commission may declare such a plan effective if, 
after providing for notice and comment, it determines that the plan is 
necessary or appropriate in the public interest and for the protection 
of investors, to foster cooperation and coordination among the SROs, to 
remove impediments to, and foster the development of, a national market 
system and a national clearance and settlement system, and is in 
conformity with the factors set forth in Section 17(d) of the Act. 
Commission approval of a plan filed pursuant to Rule 17d-2 relieves an 
SRO of those regulatory responsibilities allocated by the plan to 
another SRO.
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    \10\ See Securities Exchange Act Release No. 12935 (October 28, 
1976), 41 FR 49091 (November 8, 1976).
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II. The Plan

    On December 11, 2007, the Commission declared effective the SRO 
participants' Plan for allocating regulatory responsibilities pursuant 
to Rule 17d-2.\11\ On April 11, 2008, the Commission approved an 
amendment to the Plan to include NASDAQ as a participant.\12\ On 
October 9, 2008, the Commission approved an amendment to the Plan to 
clarify that the term Regulatory Responsibility for options position 
limits includes examination responsibilities for the delta hedging 
exemption.\13\ The Plan is designed to reduce regulatory duplication 
for common members by allocating regulatory responsibility for certain 
options-related market surveillance matters among the SRO 
Participants.\14\ Generally, under the current Plan, an SRO Participant 
will serve as the Designated Options Surveillance Regulator (``DOSR'') 
for each common member assigned to it and will assume regulatory 
responsibility with respect to that common member's compliance with 
applicable common rules for certain accounts. When an SRO has been 
named as a common member's DOSR, all other SROs to which the common 
member belongs will be relieved of regulatory responsibility for that 
common member, pursuant to the terms of the Plan, with respect to the 
applicable common rules specified in Exhibit A to the Plan.
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    \11\ See Securities Exchange Act Release No. 56941 (December 11, 
2007), 72 FR 71723 (December 18, 2007) (File No. 4-551).
    \12\ See Securities Exchange Act Release No. 57649 (April 11, 
2008), 73 FR 20976 (April 17, 2008) (File No. 4-551).
    \13\ See Securities Exchange Act Release No. 58765 (October 9, 
2008), 73 FR 62344 (October 20, 2008) (File No. 4-551).
    \14\ The Plan is wholly separate from the multiparty options 
agreement made pursuant to Rule 17d-2 by and among Amex, BSE, CBOE, 
ISE, FINRA, New York Stock Exchange LLC, NASDAQ, NYSE Arca, and Phlx 
involving the allocation of regulatory responsibilities with respect 
to common members for options-related sales practice matters 
relating to the conduct of broker-dealers of accounts for listed 
options or index warrants. See Securities Exchange Act Release Nos. 
57987 (June 18, 2008), 73 FR 36156 (June 25, 2008) (File No. S7-
966).
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III. Proposed Amendment to the Plan

    On February 4, 2010, the parties submitted a proposed amendment to 
the Plan. The primary purpose of the amendment is to add BATS Exchange, 
Inc. and C2 Options Exchange, Incorporated as SRO participants and to 
reflect the name changes of the American Stock Exchange LLC to the NYSE 
Amex LLC, and the Boston Stock Exchange, Inc. to the NASDAQ OMX BX, 
Inc. The amended agreement replaces the previous agreement in its 
entirety. The text of the proposed amended 17d-2 plan is as follows 
(additions are italicized; deletions are [bracketed]):
* * * * *
    AGREEMENT BY AND AMONG NYSE AMEX LLC [THE AMERICAN STOCK EXCHANGE], 
BATS EXCHANGE, INC., NASDAQ OMX BX, INC. [THE BOSTON STOCK EXCHANGE], 
C2 OPTIONS EXCHANGE, INCORPORATED, THE CHICAGO BOARD OPTIONS EXCHANGE, 
INCORPORATED, THE INTERNATIONAL SECURITES EXCHANGE LLC, FINANCIAL 
INDUSTRY REGULATORY AUTHORITY, INC, NYSE ARCA, INC., THE NASDAQ STOCK 
MARKET LLC, AND NASDAQ OMX PHLX, INC., PURSUANT TO RULE 17D-2 UNDER THE 
SECURITIES EXCHANGE ACT OF 1934
    This agreement (this ``Agreement''), by and among the NYSE Amex LLC 
[American Stock Exchange] (``Amex''), BATS Exchange, Inc., (``BATS''), 
the [Boston Stock Exchange, Inc. (``BSE'')] C2 Options Exchange, 
Incorporated (``C2''), the Chicago Board Options Exchange, Incorporated 
(``CBOE''), the International Securities Exchange LLC (``ISE''), 
Financial Industry Regulatory Authority, Inc. (``FINRA''), NYSE Arca, 
Inc. (``Arca''), The NASDAQ Stock Market LLC (``Nasdaq''), the NASDAQ 
OMX BX, Inc. (``BX'') and the NASDAQ OMX PHLX, Inc. (``PHLX''), is made 
this 10th day of October 2007, and as amended the 31st day of March 
2008, the 1st day of October 2008, and this 3rd day of February 2010 
pursuant to Section 17(d) of the Securities Exchange Act of 1934, as 
amended (the ``Exchange Act''), and Rule 17d-2 thereunder (``Rule 17d-
2''), which allows for a joint plan among self-regulatory organizations 
(``SROs'') to allocate regulatory obligations with respect to brokers 
or dealers that are members of two or more of the parties to this 
Agreement (``Common Members''). The Amex, BATS, C2, [BSE,] CBOE, ISE, 
FINRA,

[[Page 9972]]

Arca, Nasdaq, BX, and PHLX are collectively referred to herein as the 
``Participants'' and individually, each a ``Participant.'' This 
Agreement shall be administered by a committee known as the Options 
Surveillance Group (the ``OSG'' or ``Group''), as described in Section 
V hereof. Unless defined in this Agreement or the context otherwise 
requires, the terms used herein shall have the meanings assigned 
thereto by the Exchange Act and the rules and regulations thereunder.
    Whereas, the Participants desire to eliminate regulatory 
duplication with respect to SRO market surveillance of Common Member 
\1\ activities with regard to certain common rules relating to listed 
options (``Options''); and
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    \1\ In the case of [the BSE]BX, members are those persons who 
are Options Participants (as defined in the Boston Options Exchange 
LLC Rules).
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    Whereas, for this purpose, the Participants desire to execute and 
file this Agreement with the Securities and Exchange Commission (the 
``SEC'' or ``Commission'') pursuant to Rule 17d-2.
    Now, therefore, in consideration of the mutual covenants contained 
in this Agreement, the Participants agree as follows:
    I. Except as otherwise provided in this Agreement, each Participant 
shall assume Regulatory Responsibility (as defined below) for the 
Common Members that are allocated or assigned to such Participant in 
accordance with the terms of this Agreement and shall be relieved of 
its Regulatory Responsibility as to the remaining Common Members. For 
purposes of this Agreement, a Participant shall be considered to be the 
Designated Options Surveillance Regulator (``DOSR'') for each Common 
Member that is allocated to it in accordance with Section VII.
    II. As used in this Agreement, the term ``Regulatory 
Responsibility'' shall mean surveillance, investigation and enforcement 
responsibilities relating to compliance by the Common Members with such 
Options rules of the Participants as the Participants shall determine 
are substantially similar and shall approve from time to time, insofar 
as such rules relate to market surveillance (collectively, the ``Common 
Rules''). For the purposes of this Agreement the list of Common Rules 
is attached as Exhibit A hereto, which may only be amended upon 
unanimous written agreement by the Participants. The DOSR assigned to 
each Common Member shall assume Regulatory Responsibility with regard 
to that Common Member's compliance with the applicable Common Rules for 
certain accounts.\2\ A DOSR may perform its Regulatory Responsibility 
or enter an agreement to transfer or assign such responsibilities to a 
national securities exchange registered with the SEC under Section 6(a) 
of the Exchange Act or a national securities association registered 
with the SEC under Section 15A of the Exchange Act. A DOSR may not 
transfer or assign its Regulatory Responsibility to an association 
registered for the limited purpose of regulating the activities of 
members who are registered as brokers or dealers in security futures 
products.
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    \2\ Certain accounts shall include customer (``C'' as classified 
by the Options Clearing Corporation (``OCC'')) and firm (``F'' as 
classified by OCC) accounts, as well as other accounts, such as 
market maker accounts as the Participants shall, from time to time, 
identify as appropriate to review.
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    The term ``Regulatory Responsibility'' does not include, and each 
Participant shall retain full responsibility with respect to:
    (a) Surveillance, investigative and enforcement responsibilities 
other than those included in the definition of Regulatory 
Responsibility;
    (b) Any aspects of the rules of a Participant that are not 
substantially similar to the Common Rules or that are allocated for a 
separate surveillance purpose under any other agreement made pursuant 
to Rule 17d-2. Any such aspects of a Common Rule will be noted as 
excluded on Exhibit A.
    With respect to options position limits, the term Regulatory 
Responsibility shall include examination responsibilities for the delta 
hedging exemption. Specifically, the Participants intend that FINRA 
will conduct examinations for delta hedging for all Common Members that 
are members of FINRA notwithstanding the fact that FINRA's position 
limit rule is, in some cases, limited to only firms that are not 
members of an options exchange (i.e., access members). In such cases, 
FINRA's examinations for delta hedging options position limit 
violations will be for the identical or substantively similar position 
limit rule(s) of the other Participant(s). Examinations for delta 
hedging for Common Members that are non-FINRA members will be conducted 
by the same Participant conducting position limit surveillance. The 
allocation of Common Members to DOSRs for surveillance of compliance 
with options position limits and other agreed to Common Rules is 
provided in Exhibit B. The allocation of Common Members to DOSRs for 
examinations of the delta hedging exemption under the options position 
limits rules is provided in Exhibit C.
    III. Each year within 30 days of the anniversary date of the 
commencement of operation of this Agreement, or more frequently if 
required by changes in the rules of a Participant, each Participant 
shall submit to the other Participants, through the Chair of the OSG, 
an updated list of Common Rules for review. This updated list may add 
Common Rules to Exhibit A, shall delete from Exhibit A rules of that 
Participant that are no longer identical or substantially similar to 
the Common Rules, and shall confirm that the remaining rules of the 
Participant included on Exhibit A continue to be identically or 
substantially similar to the Common Rules. Within 30 days from the date 
that each Participant has received revisions to Exhibit A from the 
Chair of the OSG, each Participant shall confirm in writing to the 
Chair of the OSG whether that Participant's rules listed in Exhibit A 
are Common Rules.
    IV. Apparent violation of another Participant's rules discovered by 
a DOSR, but which rules are not within the scope of the discovering 
DOSR's Regulatory Responsibility, shall be referred to the relevant 
Participant for such action as is deemed appropriate by that 
Participant.
    Notwithstanding the foregoing, nothing contained herein shall 
preclude a DOSR in its discretion from requesting that another 
Participant conduct an investigative or enforcement proceeding 
(``Proceeding'') on a matter for which the requesting DOSR has 
Regulatory Responsibility. If such other Participant agrees, the 
Regulatory Responsibility in such case shall be deemed transferred to 
the accepting Participant and confirmed in writing by the Participants 
involved. Additionally, nothing in this Agreement shall prevent another 
Participant on whose market potential violative activity took place 
from conducting its own Proceeding on a matter. The Participant 
conducting the Proceeding shall advise the assigned DOSR. Each 
Participant agrees, upon request, to make available promptly all 
relevant files, records and/or witnesses necessary to assist another 
Participant in a Proceeding.
    V. The OSG shall be composed of one representative designated by 
each of the Participants (a ``Representative''). Each Participant shall 
also designate one or more persons as its alternate representative(s) 
(an ``Alternate Representative''). In the absence of the 
Representative, the Alternate Representative shall assume the powers, 
duties and responsibilities of the Representative. Each Participant may 
at any time replace its Representative and/or its Alternate 
Representative to the

[[Page 9973]]

Group.\3\ A majority of the OSG shall constitute a quorum and, unless 
otherwise required, the affirmative vote of a majority of the 
Representatives present (in person, by telephone or by written consent) 
shall be necessary to constitute action by the Group.
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    \3\ A Participant must give notice to the Chair of the Group of 
such a change.
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    The Group will have a Chair, Vice Chair and Secretary. A different 
Participant will assume each position on a rotating basis for a one-
year term. In the event that a Participant replaces a Representative 
who is acting as Chair, Vice Chair or Secretary, the newly appointed 
Representative shall assume the position of Chair, Vice Chair, or 
Secretary (as applicable) vacated by the Participant's former 
Representative. In the event a Participant cannot fulfill its duties as 
Chair, the Participant serving as Vice Chair shall substitute for the 
Chair and complete the subject unfulfilled term. All notices and other 
communications for the OSG are to be sent in care of the Chair and, as 
appropriate, to each Representative.
    VI. The OSG shall determine the times and locations of Group 
meetings, provided that the Chair, acting alone, may also call a 
meeting of the Group in the event the Chair determines that there is 
good cause to do so. To the extent reasonably possible, notice of any 
meeting shall be given at least ten business days prior to the meeting 
date. Representatives shall always be given the option of participating 
in any meeting telephonically at their own expense rather than in 
person.
    VII. No less frequently than every two years, in such manner as the 
Group deems appropriate, the OSG shall allocate Common Members that 
conduct an Options business among the Participants (``Allocation''), 
and the Participant to which a Common Member is allocated will serve as 
the DOSR for that Common Member. Any Allocation shall be based on the 
following principles, except to the extent all affected Participants 
consent to one or more different principles:
    (a) The OSG may not allocate a Common Member to a Participant 
unless the Common Member is a member of that Participant.
    (b) To the extent practicable, Common Members that conduct an 
Options business shall be allocated among the Participants of which 
they are members in such manner as to equalize as nearly as possible 
the allocation among such Participants, provided that no Common Members 
shall be allocated to FINRA. For example, if sixteen Common Members 
that conduct an Options business are members only of three 
Participants, none of which is FINRA, those Common Members shall be 
allocated among the three Participants such that no Participant is 
allocated more than six such members and no Participant is allocated 
less than five such members. If, in the previous example, one of the 
three Participants is FINRA, the sixteen Common Members would be 
allocated evenly between the remaining Participants, so that the two 
non-FINRA Participants would be allocated eight Common Members each.
    (c) To the extent practicable, Allocation shall take into account 
the amount of Options activity conducted by each Common Member in order 
to most evenly divide the Common Members with the largest amount of 
activity among the Participants of which they are members. Allocation 
will also take into account similar allocations pursuant to other plans 
or agreements to which the Common Members are party to maintain 
consistency in oversight of the Common Members.\4\
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    \4\ For example, if one Participant was allocated a Common 
Member by another regulatory group that Participant would be 
assigned to be the DOSR of that Common Member, unless there is good 
cause not to make that assignment.
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    (d) To the extent practicable, Allocation of Common Members to 
Participants will be rotated among the applicable Participants such 
that a Common Member shall not be allocated to a Participant to which 
that Common Member was allocated within the previous two years. The 
assignment of DOSRs pursuant to the Allocation is attached as Exhibit B 
hereto, and will be updated from time to time to reflect Common Member 
Allocation changes.
    (e) The Group may reallocate Common Members from time-to-time, as 
it deems appropriate.
    (f) Whenever a Common Member ceases to be a member of its DOSR, the 
DOSR shall promptly inform the Group, which shall review the matter and 
allocate the Common Member to another Participant.
    (g) A DOSR may request that a Common Member to which it is assigned 
be reallocated to another Participant by giving 30 days written notice 
to the Chair of the OSG. The Group, in its discretion, may approve such 
request and reallocate the Common Member to another Participant.
    (h) All determinations by the Group with respect to Allocation 
shall be made by the affirmative vote of a majority of the Participants 
that, at the time of such determination, share the applicable Common 
Member being allocated; a Participant shall not be entitled to vote on 
any Allocation relating to a Common Member unless the Common Member is 
a member of such Participant.
    VIII. Each DOSR shall conduct routine surveillance reviews to 
detect violations of the applicable Common Rules by each Common Member 
allocated to it with a frequency (daily, weekly, monthly, quarterly, 
semi-annually or annually as noted on Exhibit A) not less than that 
determined by the Group. The other Participants agree that, upon 
request, relevant information in their respective files relative to a 
Common Member will be made available to the applicable DOSR. In 
addition, each Participant shall provide, to the extent not otherwise 
already provided, information pertaining to its surveillance program 
that would be relevant to FINRA or the Participant(s) conducting 
routine examinations for the delta hedging exemption.
    At each meeting of the OSG, each Participant shall be prepared to 
report on the status of its surveillance program for the previous 
quarter and any period prior thereto that has not previously been 
reported to the Group. In the event a DOSR believes it will not be able 
to complete its Regulatory Responsibility for its allocated Common 
Members, it will so advise the Group in writing promptly. The Group 
will undertake to remedy this situation by reallocating the subject 
Common Members among the remaining Participants. In such instance, the 
Group may determine to impose a regulatory fee for services provided to 
the DOSR that was unable to fulfill its Regulatory Responsibility.
    IX. Each Participant will, upon request, promptly furnish a copy of 
the report or applicable portions thereof relating to any investigation 
made pursuant to the provisions of this Agreement to each other 
Participant of which the Common Member under investigation is a member.
    X. Each Participant will routinely populate a common database, to 
be accessed by the Group relating to any formal regulatory action taken 
during the course of a Proceeding with respect to the Common Rules 
concerning a Common Member.
    XI. Any written notice required or permitted to be given under this 
Agreement shall be deemed given if sent by certified mail, return 
receipt requested, to any Participant to the attention of that 
Participant's Representative, to the Participant's principal place of 
business or by e-mail at such address as the Representative shall have 
filed in writing with the Chair.
    XII. The costs incurred by each Participant in discharging its 
Regulatory Responsibility under this Agreement are

[[Page 9974]]

not reimbursable. However, any of the Participants may agree that one 
or more will compensate the other(s) for costs incurred.
    XIII. The Participants shall notify the Common Members of this 
Agreement by means of a uniform joint notice approved by the Group. 
Each Participant will notify the Common Members that have been 
allocated to it that such Participant will serve as DOSR for that 
Common Member.
    XIV. This Agreement shall be effective upon approval of the 
Commission. This Agreement may only be amended in writing duly approved 
by each Participant. All amendments to this Agreement, excluding 
changes to Exhibits A, B and C, must be filed with and approved by the 
Commission.
    XV. Any Participant may manifest its intention to cancel its 
participation in this Agreement at any time upon providing written 
notice to (i) the Group six months prior to the date of such 
cancellation, or such other period as all the Participants may agree, 
and (ii) the Commission. Upon receipt of the notice the Group shall 
allocate, in accordance with the provisions of this Agreement, those 
Common Members for which the canceling Participant was the DOSR. The 
canceling Participant shall retain its Regulatory Responsibility and 
other rights, privileges and duties pursuant to this Agreement until 
the Group has completed the reallocation as described above, and the 
Commission has approved the cancellation.
    XVI. The cancellation of its participation in this Agreement by any 
Participant shall not terminate this Agreement as to the remaining 
Participants. This Agreement will only terminate following notice to 
the Commission, in writing, by the then Participants that they intend 
to terminate the Agreement and the expiration of the applicable notice 
period. Such notice shall be given at least six months prior to the 
intended date of termination, or such other period as all the 
Participants may agree. Such termination will become effective upon 
Commission approval.
    XVII. Participation in the Group shall be strictly limited to the 
Participants and no other party shall have any right to attend or 
otherwise participate in the Group except with the unanimous approval 
of all Participants. Notwithstanding the foregoing, any national 
securities exchange registered with the SEC under Section 6(a) of the 
Act or any national securities association registered with the SEC 
under section 15A of the Act may become a Participant to this Agreement 
provided that: (i) Such applicant has adopted rules substantially 
similar to the Common Rules, and received approval thereof from the 
SEC; (ii) such applicant has provided each Participant with a signed 
statement whereby the applicant agrees to be bound by the terms of this 
Agreement to the same effect as though it had originally signed this 
Agreement and (iii) an amended agreement reflecting the addition of 
such applicant as a Participant has been filed with and approved by the 
Commission.
    XVIII. This Agreement is wholly separate from the multiparty 
Agreement made pursuant to Rule 17d-2 by and among the [Amex, BSE, 
CBOE, ISE, NASD, the New York Stock Exchange, LLC, Arca and PHLX] 
American Stock Exchange, LLC, the Boston Stock Exchange, Inc., the 
Chicago Board Options Exchange, Inc., the International Securities 
Exchange, LLC, Financial Industry Regulatory Authority, The NASDAQ 
Stock Market LLC, Inc., the New York Stock Exchange, LLC, the NYSE 
Arca, Inc., and the Philadelphia Stock Exchange, Inc. involving the 
allocation of regulatory responsibilities with respect to common 
members for compliance with common rules relating to the conduct by 
broker-dealers of accounts for listed options or index warrants entered 
into on [December 1, 2006] June 5, 2008, and as may be amended from 
time to time.
Limitation of Liability
    No Participant nor the Group nor any of their respective directors, 
governors, officers, employees or representatives shall be liable to 
any other Participant in this Agreement for any liability, loss or 
damage resulting from or claimed to have resulted from any delays, 
inaccuracies, errors or omissions with respect to the provision of 
Regulatory Responsibility as provided hereby or for the failure to 
provide any such Regulatory Responsibility, except with respect to such 
liability, loss or damages as shall have been suffered by one or more 
of the Participants and caused by the willful misconduct of one or more 
of the other Participants or its respective directors, governors, 
officers, employees or representatives. No warranties, express or 
implied, are made by the Participants, individually or as a group, or 
by the OSG with respect to any Regulatory Responsibility to be 
performed hereunder.
Relief From Responsibility
    Pursuant to Section 17(d)(1)(A) of the Exchange Act and Rule 17d-2, 
the Participants join in requesting the Commission, upon its approval 
of this Agreement or any part thereof, to relieve the Participants that 
are party to this Agreement and are not the DOSR as to a Common Member 
of any and all Regulatory Responsibility with respect to the matters 
allocated to the DOSR.

Common Rules

    Violation I--Expiring Exercise Declarations (EED)--For Listed Equity Options Expiring: The Third Saturday
                  Following the Third Friday of a Month, Quarterly, and For Listed FLEX Options
----------------------------------------------------------------------------------------------------------------
              SRO                       Description of rule         Exchange rule number    Frequency of review
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NYSE Amex......................  Exercise of Options Contracts...  Rule 980..............  At Expiration.
BATS...........................  Exercise of Options Contracts...  Rule 23.1.............  At Expiration.
BOX............................  Exercise of Options Contracts...  Chapter VII, Section 1  At Expiration.
C2.............................  Exercise of Options Contracts...  Rule 11.1.............  At Expiration.
CBOE...........................  Exercise of Options Contracts...  Rule 11.1.............  At Expiration.
FINRA..........................  Exercise of Options Contracts...  Rule 2360(b)(23)......  At Expiration.
ISE............................  Exercise of Options Contracts...  Rule 1100.............  At Expiration.
Nasdaq.........................  Exercise of Options Contracts...  Nasdaq Chapter VIII,    At Expiration.
                                                                    Sec.1.
NYSE Arca......................  Exercise of Options Contracts...  Rule 6.24.............  At Expiration.
NASDAQ OMX PHLX................  Exercise of Equity Options        Rule 1042.............  At Expiration
                                  Contracts.
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[[Page 9975]]


 Violation II--Position Limits (PL)--For Listed Equity Options Expiring: The Third Saturday Following the Third
                                          Friday of a Month, Quarterly
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                                  Description of rule (for review
              SRO                       as they apply to PL)          Exchange rule number   Frequency of review
----------------------------------------------------------------------------------------------------------------
NYSE Amex......................  Position Limits..................  Rule 904...............  Daily.
                                 Liquidating Positions............  Rule 907...............  As Needed.
BOX............................  Position Limits..................  Chapter III, Section 7.  Daily.
                                 Exemptions from Position.........  Chapter III, Section 8.  As Needed.
                                 Liquidation Positions............  Chapter III, Section 11  As Needed.
BATS...........................  Position Limits..................  Rule 18.7..............  Daily.
                                 Exemptions from Position Limits..  Rule 18.8..............  As Needed.
                                 Liquidation Positions............  Rule 18.11.............  As Needed.
C2.............................  Position Limits..................  Rule 4.11..............  Daily.
                                 Liquidation of Positions.........  Rule 4.14..............  As Needed.
CBOE...........................  Position Limits..................  Rule 4.11..............  Daily.
                                 Liquidation of Positions.........  Rule 4.14..............  As Needed.
FINRA..........................  Position Limits..................  Rule 2360(b)(3)........  Daily.
                                 Liquidation of Positions and       Rule 2360(b)(6)........  As Needed.
                                  Restrictions on Access.
ISE............................  Position Limits..................  Rule 412...............  Daily.
                                 Exemptions from Position Limits..  Rule 413...............  As Needed.
                                 Liquidating Positions............  Rule 416...............  As Needed.
Nasdaq.........................  Position Limits..................  Nasdaq Rule Chapter III  Daily.
                                                                     Section 7.
                                 Exemptions from Position Limits..  Nasdaq Rule Chapter III  As Needed.
                                                                     Section 8.
                                 Liquidating Positions............  Nasdaq Rule Chapter III  As Needed.
                                                                     Section 11.
NYSE Arca......................  Position Limits..................  Rule 6.8...............  Daily.
                                 Liquidation of Position..........  Rule 6.7...............  As Needed.
NASDAQ OMX PHLX................  Position Limits..................  Rule 1001..............  Daily.
                                 Liquidation of Positions.........  Rule 1004..............  As Needed.
----------------------------------------------------------------------------------------------------------------


             Violation III--Large Options Position Report (LOPR)--for Listed Equity and ETF Options
----------------------------------------------------------------------------------------------------------------
                                  Description of rule (for review
              SRO                      as they apply to LOPR)         Exchange rule number   Frequency of review
----------------------------------------------------------------------------------------------------------------
NYSE Amex......................  Reporting of Options Positions...  Rule 906...............  Yearly.
BATS...........................  Reports Related to Position        Rule 18.10.............  Yearly.
                                  Limits.
BOX............................  Reports Related to Position        Chapter III, Section 10  Yearly.
                                  Limits.
C2.............................  Reports Related to Position        Rule 4.13(a),..........  Yearly.
                                  Limits.
                                 Reports Related to Position        Rule 4.13(b)...........  Yearly.
                                  Limits.
                                 Reports Related to Position        Rule 4.13(d)...........  Yearly.
                                  Limits.
CBOE...........................  Reports Related to Position        Rule 4.13(a),..........  Yearly.
                                  Limits.
                                 Reports Related to Position        Rule 4.13(b)...........  Yearly.
                                  Limits.
                                 Reports Related to Position        Rule 4.13(d)...........  Yearly.
                                  Limits.
FINRA..........................  Options..........................  Rule 2360(b)(5)........  Yearly.
ISE............................  Reports Related to Position        Rule 415...............  Yearly.
                                  Limits.
Nasdaq.........................  Reports Related to Position        Chapter III Section 10.  Yearly.
                                  Limits.
NYSE Arca......................  Reporting of Options Positions...  Rule 6.6...............  Yearly.
NASDAQ OMX PHLX................  Reporting of Options Positions...  Rule 1003..............  Yearly.
----------------------------------------------------------------------------------------------------------------


                       Violation IV--Options Clearing Corporation (OCC) Adjustment Process
----------------------------------------------------------------------------------------------------------------
                                    Description of rule (as they
                                  apply to OCC Adjustments/By-laws
              SRO                 Article VI, Section 1 .01(a) and    Exchange rule number   Frequency of review
                                               .02))
----------------------------------------------------------------------------------------------------------------
NYSE Amex......................  Contract made on Acceptance of     Rule 965NY.............  Yearly.
                                  Bid or Offer.
BATS...........................  Adherence to Law.................  Rule 18.1..............  Yearly.
BOX............................  Adherence to Law.................  Chapter III, Section 1.  Yearly.
C2.............................  Adherence to Law.................  Rule 4.2...............  Yearly.
CBOE...........................  Adherence to Law.................  Rule 4.2...............  Yearly.
FINRA..........................  Violation of By-Laws and Rules of  Rule 2360(b)(21).......  Yearly.
                                  FINRA or The OCC.
ISE............................  Adherence to Law.................  Rule 401...............  Yearly.
Nasdaq.........................  Adherence to Law.................  Chapter III, Section 1.  Yearly.
NYSE Arca......................  Adherence to Law and Good          Rule 11.1..............  Yearly.
                                  Business Practice.
NASDAQ OMX PHLX................  Violation of By-Laws and Rules of  Rule 1050..............  Yearly.
                                  OCC.
----------------------------------------------------------------------------------------------------------------


[[Page 9976]]

* * * * *

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an e-mail to <a href="/cdn-cgi/l/email-protection#f98b8c959cd49a9694949c978d8ab98a9c9ad79e968f"><span class="__cf_email__" data-cfemail="addfd8c1c880cec2c0c0c8c3d9deeddec8ce83cac2db">[email protected]</span></a>. Please include 
File Number 4-551 on the subject line.

Paper Comments

    <bullet> 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 4-551. 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 that are filed with the 
Commission, and all written communications relating to the proposed 
plan 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 plan also will be available for inspection and 
copying at the principal offices of Amex, BATS, C2, CBOE, ISE, FINRA, 
Arca, NASDAQ, BX and Phlx. 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 4-
551 and should be submitted on or before March 25, 2010.

V. Discussion

    The Commission continues to believe that the Plan, as proposed to 
be amended, is an achievement in cooperation among the SRO 
participants, and will reduce unnecessary regulatory duplication by 
allocating to the designated SRO the responsibility for certain 
options-related market surveillance matters that would otherwise be 
performed by multiple SROs. The Plan promotes efficiency by reducing 
costs to firms that are members of more than one of the SRO 
participants. In addition, because the SRO participants coordinate 
their regulatory functions in accordance with the Plan, the Plan 
promotes, and will continue to promote, investor protection.
    Under paragraph (c) of Rule 17d-2, the Commission may, after 
appropriate notice and comment, declare a plan, or any part of a plan, 
effective. In this instance, the Commission believes that appropriate 
notice and comment can take place after the proposed amendment is 
effective. The purpose of the amendment is to add BATS Exchange, Inc. 
and C2 Options Exchange, Incorporated as SRO participants and to 
reflect the name changes of Amex and BX. By declaring it effective 
today, the amended Plan can become effective and be implemented without 
undue delay. In addition, the Commission notes that the prior version 
of this Plan was published for comment, and the Commission did not 
receive any comments thereon.\15\ Finally, the Commission does not 
believe that the amendment to the Plan raises any new regulatory issues 
that the Commission has not previously considered.
---------------------------------------------------------------------------

    \15\ See supra note 13 (citing to Securities Exchange Act 
Release No. 58765).
---------------------------------------------------------------------------

VI. Conclusion

    This order gives effect to the amended Plan submitted to the 
Commission that is contained in File No. 4-551.
    It is therefore ordered, pursuant to Section 17(d) of the Act,\16\ 
that the Plan, as amended by and between the Amex, BATS, C2, CBOE, ISE, 
FINRA, Arca, NASDAQ, BX and Phlx filed with the Commission pursuant to 
Rule 17d-2 on February 4, 2010 is hereby approved and declared 
effective.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78q(d).
---------------------------------------------------------------------------

    It is further ordered that those SRO participants that are not the 
DOSR as to a particular common member are relieved of those regulatory 
responsibilities allocated to the common member's DOSR under the 
amended Plan to the extent of such allocation.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(34).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-4455 Filed 3-3-10; 8:45 am]
BILLING CODE 8011-01-P


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