49520 Federal Register / Vol. 76, No. 154 / Wednesday, August 10, 2011 / Notices 

28 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Exchange replaced its traditional auction 

marketplace with its New Trading Model beginning 

in 2006. See Securities Exchange Act Rel. No. 34– 

54550 (Sept. 29, 2006), 71 FR 59563 (Oct. 10, 2006) 

(SR–CHX–2006–05). 4 Id., Section II.C. Institutional Brokers. 5See email from James Ongena, Vice President, 

Associate General Counsel, CHX, to Christopher 

Chow, Special Counsel, Commission, dated 

August 3, 2011. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–BX–2011–049. 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 the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–BX– 

2011–049 and should be submitted on 

or before August 31, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.28

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–20272 Filed 8–9–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65035; File No. SR–CHX– 

2011–20] 

Self-Regulatory Organizations; 

Chicago Stock Exchange, Inc.; Notice 

of Filing of Proposed Rule Change To 

Impose Certain Requirements on 

Exchange-Registered Institutional 

Broker Firms That Operate a Separate 

Non-Institutional Broker Unit Within 

the Firm 

August 4, 2011. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on July 26, 

2011, Chicago Stock Exchange, Inc. 

(‘‘Exchange’’ or ‘‘CHX’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to add a rule 

to impose certain requirements on 

Exchange-registered Institutional Broker 

firms which operate a separate, nonInstitutional Broker unit within the 

firm. The text of this proposed rule 

change is available on the Exchange’s 

Web site at (http://www.chx.com), at the 

Exchange’s Office of the Secretary and 

in 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 

CHX included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received regarding the 

proposal. The text of these statements 

may be examined at the places specified 

in Item IV below. The CHX 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 

The Exchange is proposing to add 

Rule 5 to Article 17 to permit Exchangeregistered Institutional Broker 

(‘‘Institutional Broker’’) firms to 

establish and operate a separate, nonInstitutional Broker unit within the 

firm. The Exchange proposes to add 

information barrier requirements for 

Institutional Brokers that wish to 

operate a separate unit within the larger 

firm to conduct business otherwise than 

as an Institutional Broker. By this 

proposal, the Exchange believes that it 

will enable existing and new 

Institutional Broker firms to engage in 

trading activities through the nonInstitutional Broker unit in a manner 

which better delineates the activity 

occurring on and off the Exchange. 

CHX-registered Institutional Brokers 

are an elective sub-category of Exchange 

Participants requiring registration with 

the Exchange and are subject to the 

obligations of Article 17 of the CHX 

rules, in addition to the other provisions 

of Exchange rules. Institutional Broker 

firms typically provide order handling 

and execution services for other brokerdealers or institutional clients, and are 

the successors to the floor brokers under 

the Exchange’s previous floor-based, 

auction trading model.3 The 

Commission’s order approving the 

Exchange’s New Trading Model noted, 

‘‘Institutional brokers would be deemed 

to be participants operating on the 

Exchange, although they would not 

effect transactions from a physical 

trading floor (since the Exchange will no 

longer have a physical trading floor) and 

could trade from any location. A 

customer order would be deemed to be 

on the Exchange when received by an 

institutional broker, but would not have 

priority in the Matching System until it 

is entered into the system.’’ 4 Although 

an Institutional Broker is deemed to be 

operating on the Exchange, the CHX is 

proposing to allow a separate unit 

within the larger Institutional Broker 

firm to execute orders otherwise than on 

the Exchange.5

New Rule 5 proposes to establish new 

conditions for an Institutional Broker 


emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 154 / Wednesday, August 10, 2011 / Notices 49521 

6Because market makers normally trade as 

principal, either against other customer orders of 

the firm or other, unaffiliated market participants, 

the heightened potential for conflicts of interest in 

their transactions requires a stricter separation 

between the market making and non-market making 

units of a single firm. For example, under Article 

16, Rule 9, the information barrier procedures of 

market making unit must address the potential use 

or misuse of post-trade clearing information to 

compromise the information barrier. While 

Institutional Broker firms do trade from time-totime as principal, they normally handle orders as 

agent for their customers. To the extent that a 

particular Institutional Broker firm conducts a 

significant amount of its business as principal, the 

Exchange will require that its information barrier 

procedures specifically address that activity in a 

manner which is reasonably designed to address 

any conflicts of interest. The Exchange currently 

conducts surveillance of the principal trading 

activity of Institutional Broker firms for compliance 

with our rules, such as the prohibition on trading 

ahead contained in Article 9, Rule 17. Since the 

principal purpose of creating a non-Institutional 

Broker unit is to have it considered to be not ‘‘on 

the Exchange,’’ the Exchange believes that proposed 

standards for information barrier procedures as set 

forth in new Rule 5 are adequate to address those 

concerns. 

7The Exchange represents that it will implement 

as of the time this proposal is approved adequate 

oversight processes which are reasonably designed 

to ensure compliance by our Participants with the 

requirements of the provisions of this proposal. 

firm that wishes to include another unit 

of the firm (the ‘‘non-Institutional 

Broker unit’’) to conduct business 

otherwise than as an Institutional 

Broker, including the handling and 

execution of orders on the CHX, in other 

trading centers or in the over-thecounter (‘‘OTC’’) marketplace. The nonInstitutional Broker unit would not be 

considered as part of the facilities of the 

Exchange and its trading activity would 

be treated the same as any other order 

sending Participant which is not 

registered as an Institutional Broker. 

Since the non-Institutional Broker unit 

will be acting as an order entry unit of 

the firm, it will be generally subject to 

the strictures of the Exchange’s rules, 

except as to Articles 16 and 17 which 

pertain to Market Makers and 

Institutional Brokers, respectively, on an 

exclusive basis. For purposes of 

applying the Exchange’s Schedule of 

Fees and Assessments, the activity of a 

non-Institutional Broker unit would not 

be considered as Institutional Broker 

activity. A multi-unit Institutional 

Broker firm would be required to 

establish and maintain information 

barriers between the Institutional Broker 

unit and non-Institutional Broker unit. 

Such information barriers will be 

required to be reasonably designed to 

prevent the Institutional Broker unit 

from having knowledge of unexecuted 

customer orders in possession of the 

non-Institutional Broker unit and 

likewise prevent the non-Institutional 

Broker unit from having knowledge of 

unexecuted customer orders in the 

possession of the Institutional Broker 

unit. The Institutional Broker unit may, 

however, transmit an order to the nonInstitutional Broker unit of the firm for 

purposes of handling and executing the 

order, and the non-Institutional Broker 

unit may likewise transmit an order to 

the Institutional Broker unit. 

Through this filing, the Exchange 

proposes that Institutional Broker firms 

which wish to operate a nonInstitutional Broker unit would be 

required to create and maintain 

adequate information barrier 

procedures. At the time an Institutional 

Broker firm wished to set up a nonInstitutional Broker unit within the 

firm, it would be required to submit to 

the Exchange its Written Supervisory 

Procedures (‘‘WSPs’’) as they pertain to 

these information barrier procedures. At 

minimum, the WSPs will have to 

satisfactorily address (1) The manner in 

which the firm will satisfy the 

requirements of this rule (including the 

compliance and audit procedures it 

proposes to implement to ensure that 

the information barrier is maintained); 

(2) identify the names and titles of the 

person or persons responsible for 

maintenance, supervision and 

surveillance of the procedures; (3) make 

a commitment to provide the Exchange 

with such information and reports 

relating to its transactions as the 

Exchange may request; and (4) make a 

commitment to take appropriate 

remedial action against any person 

violating this rule or the Institutional 

Broker firm’s internal compliance and 

audit procedures, as well as confirming 

that the firm recognizes that the 

Exchange may take appropriate 

remedial action for any such violation. 

In addition, the proposed rule 

provides that the firm’s WSPs must 

describe the internal controls that the 

Institutional Broker firm will implement 

to satisfy each of the conditions stated 

in the rule, and the compliance and 

audit procedures proposed to 

implement and ensure that the controls 

are maintained. If the Exchange 

determined that the organizational 

structure and the compliance and audit 

procedures proposed by the 

Institutional Broker firm are acceptable, 

the Exchange would so inform the 

Institutional Broker firm, in writing. 

Unless the Exchange found that an 

Institutional Broker firm’s information 

barrier procedures were acceptable, an 

Institutional Broker firm may not 

conduct business other than on the 

Exchange. 

The Exchange believes that the 

provisions regarding the information 

barrier procedures of new Rule 5 are 

sufficient to address the issues 

presented by the operation of a nonInstitutional Broker unit within a firm 

which is an Exchange-registered 

Institutional Broker. The CHX 

understands that the non-Institutional 

Broker unit of such firms will largely 

function in a similar manner to other 

order sending firms which are not 

registered with the Exchange as an 

Institutional Broker or Market Maker 

pursuant to our rules. To the extent that 

the non-Institutional Broker wished to 

act as a Market Maker on the Exchange, 

it would have to comply with the more 

stringent information barrier procedures 

under Article 16, Rule 9 (Limitation on 

Dealings).6 The Exchange believes that 

the information barrier procedures of 

proposed Rule 5 are adequate to provide 

a meaningful separation of the 

Institutional Broker and nonInstitutional Broker units in order to 

ensure that the latter can fairly be 

treated as not being part of the 

Exchange’s trading facilities.7

Finally, the Exchange is proposing an 

Interpretation and Policy to define the 

elements of an adequate information 

barrier procedure for purposes of new 

Rule 5. Proposed Interpretation and 

Policy .01 defines an ‘‘information 

barrier’’ is an organizational structure in 

which the Institutional Broker functions 

are conducted in a physical location 

separate from the locations in which the 

non-Institutional Broker activities are 

conducted. The Institutional Broker and 

non-Institutional Broker units should 

not use trading or order management 

systems which permit them to share 

information about orders or transactions 

being handled by each respective unit. 

However, upon request and not on his 

or her own initiative, an Institutional 

Broker Representative may furnish to 

persons at the same firm or an affiliated 

firm (‘‘affiliated persons’’), the same sort 

of market information that the 

Institutional Broker would make 

available in the normal course of its 

Institutional Broker activity to any other 

person. The Institutional Broker 

Representative must provide such 

information to affiliated persons in the 

same manner that he or she would make 

such information available to a nonaffiliated person. An individual person 

may not simultaneously act as an 

Institutional Broker Representative and 

as a representative of the nonInstitutional Broker unit. The Exchange 

believes that the information barrier 

requirements as set forth in the 

proposed Interpretation and Policy are 

reasonable and appropriate given the 

nature of the relationship between the 


emcdonald on DSK2BSOYB1PROD with NOTICES
49522 Federal Register / Vol. 76, No. 154 / Wednesday, August 10, 2011 / Notices 

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

9 15 U.S.C. 78f(b)(5). 

10 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

Institutional Broker and nonInstitutional Broker units. The CHX 

further believes that the articulation of 

these standards in the proposed 

Interpretation and Policy will provide 

clarity and direction to interested 

Institutional Brokers in creating their 

information barrier procedures. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act in general,8 and 

furthers the objectives of Section 6(b)(5) 

in particular,9 in that it is designed to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

facilitating transaction in securities, to 

remove impediments and perfect the 

mechanisms of a free and open market, 

and, in general, to protect investors and 

the public interest by setting forth the 

rules and principles governing the 

trading activity of Institutional Brokers. 

By permitting an Institutional Broker 

firm to operate a separate nonInstitutional Broker unit within the 

larger firm subject to the new 

information barrier requirements, the 

proposed new Rule 5 would provide 

protection to the customers of such 

firms. Rather than routing orders which 

were directed to the OTC marketplace to 

a third-party broker-dealer for 

execution, the proposed nonInstitutional Broker unit of the firm 

could handle and execute such orders. 

The Exchange believes that this 

handling could reduce the possibility 

for errors in transmission from one firm 

to another, as well as eliminate potential 

costs imposed by the third-party brokerdealer which might have to be borne by 

the order sender or the Institutional 

Broker firm. The creation and 

maintenance of adequate information 

barrier procedures, which are subject to 

the review, approval and inspection of 

the Exchange, should help ensure that 

the Institutional Broker and nonInstitutional Broker units are in fact 

being operated separately, and that 

treatment of the non-Institutional Broker 

unit as not being part of the facilities of 

the Exchange is appropriate. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

As the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) by order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

No. SR–CHX–2011–20 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–CHX–2011–20. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–CHX– 

2011–20 and should be submitted on or 

before August 31, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–20244 Filed 8–9–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65033; File No. SR– 

NYSEAmex–2011–55] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Notice of Filing of 

Proposed Rule Change Amending 

Section 101 of the NYSE Amex 

Company Guide To Adopt Additional 

Listing Requirements for Companies 

Applying To List After Consummation 

of a ‘‘Reverse Merger’’ With a Shell 

Company 

August 4, 2011. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that, on July 22, 

2011, NYSE Amex LLC (the ‘‘Exchange’’ 

or ‘‘NYSE Amex’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the self-regulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 


emcdonald on DSK2BSOYB1PROD with NOTICES