52030 Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Notices 

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

18 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule 

19b–4(f)(6)(iii) requires that a self-regulatory 

organization submit to the Commission written 

notice of its intent to file the proposed rule change, 

along with a brief description and text of the 

proposed rule change, at least five business days 

prior to the filing of the proposed rule change, or 

such shorter time as designated by the Commission. 

The Commission is waiving the five day written 

notice requirement in this case. Therefore, the 

Commission notes that the Exchange has satisfied 

this requirement. 

19For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

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

20 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

Exchange believes that the proposed 

rule meets these requirements in that it 

promotes transparency and uniformity 

across markets concerning decisions to 

break erroneous trades, yet also ensures 

fair application of the process so that 

similarly situated member organizations 

are provided the same opportunity of a 

clearly erroneous review. The Exchange 

notes that the changes proposed herein 

will in no way interfere with the 

operation of the Pause Pilot process, as 

amended. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of 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 solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 17 and Rule 19b– 

4(f)(6)(iii) thereunder.18 The Exchange 

has asked the Commission to waive the 

30-day operative delay so that the 

proposal may become operative 

immediately upon filing. The 

Commission believes that waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest because such waiver will 

allow the clearly erroneous rules to 

continue to operate as they did prior to 

the effectiveness of the Pause Pilot 

expansion to Phase III Securities so that 

similarly situated member organizations 

are provided the same opportunity of a 

clearly erroneous review. Accordingly, 

the Commission waives the 30-day 

operative delay requirement and 

designates the proposed rule change as 

operative upon filing with the 

Commission.19

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

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 rule-comments@

sec.gov. Please include File Number SR– 

NYSE–2011–42 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NYSE–2011–42. 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 NYSE. 

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–NYSE–2011–42 and should 

be submitted on or before September 9, 

2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–21257 Filed 8–18–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65135; File No. SR–Phlx– 

2011–111] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing of Proposed Rule Change 

Requesting Permanent Approval of 

Pilot Program to Permit NASDAQ OMX 

PHLX to Receive Inbound Routes by 

Nasdaq Options Services 

August 15, 2011. 

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 August 8, 

2011, NASDAQ OMX PHLX LLC 

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

the Securities and Exchange 

Commission (q‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III 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 request 

permanent approval of the Exchange’s 

pilot program allowing Phlx to accept 

inbound routes by NASDAQ Options 

Services, LLC (‘‘NOS’’) of 1) NASDAQ 

Options Market (‘‘NOM’’) Exchange 

Direct Orders without checking the 

NOM book and 2) NOM non-system 


jlentini on DSK4TPTVN1PROD with NOTICES
Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Notices 52031 

3Pursuant to Chapter VI, Section 1(b) of the NOM 

Rules, ‘‘System Securities’’ are all options that are 

currently trading on NOM pursuant to Chapter IV 

of the NOM rules. All other options are ‘‘NonSystem Securities.’’ Pursuant to Chapter VI, Section 

(1)(e)(7) of the NOM Rules, Exchange Direct Orders 

are orders that are directed to an exchange other 

than NOM as directed by the entering party on an 

immediate-or-cancel basis without first checking 

the NOM book for liquidity. 

4NOM Rule Chapter VI, Section 11(e). Under 

NOM Rule Chapter VI, Section 11(e): (1) NOM 

routes orders in options via NOS, which serves as 

the sole ‘‘routing facility’’ of NOM; (2) the sole 

function of the routing facility is to route orders in 

options to away markets pursuant to NOM rules, 

solely on behalf of NOM; (3) NOS is a member of 

an unaffiliated self-regulatory organization, which 

is the designated examining authority for the 

broker-dealer; (4) the routing facility is subject to 

regulation as a facility of the NASDAQ Exchange, 

including the requirement to file proposed rule 

changes under Section 19 of the Act; (5) when 

routing orders in options that are not listed and 

open for trading on NOM, NOS is not a facility of 

NASDAQ and is not regulated as a facility of 

NASDAQ but as a broker-dealer regulated by its 

designated examining authority; (6) use of NOS to 

route order to other market centers is optional; (7) 

NOM must establish and maintain procedures and 

internal controls reasonably designed to adequately 

restrict the flow of confidential and proprietary 

information between the NASDAQ Exchange and 

its facilities (including the routing facility), and any 

other entity; and (8) the books, records, premises, 

officers, directors, agents, and employees of the 

routing facility, as a facility of the NASDAQ 

Exchange, shall be subject at all times to inspection 

and copying by the NASDAQ Exchange and the 

Commission. 

5See Securities Exchange Act Release Nos. 58179 

(July 17, 2008), 73 FR 42874 (July 23, 2008)(SR– 

Phlx–2008–31); 61667 (March 5, 2010), 75 FR 11964 

(March 12, 2010) (SR–Phlx–2010–36); 61668 (March 

5, 2010), 75 FR 12323 (March 15, 2010)(SR– 

NASDAQ–2010–028). See also Securities Exchange 

Act Release No. 63873 (February 9, 2011), 76 FR 

8798 (February 15, 2011)(SR–Phlx–2011–16). 

6See NASDAQ OMX PHLX Rule 985(c)(1). 

7See Securities Exchange Act Release No. 63873 

(February 9, 2011), 76 FR 8798 (February 15, 

2011)(SR–Phlx–2011–16). The Exchange intends to 

seek an extension of the pilot period while the 

proposed rule change seeking permanent approval 

of the pilot program is pending. 

8NASDAQ OMX BX, Inc. also recently filed a 

similar proposed rule change to request permanent 

approval of BX’s pilot program permitting Boston 

Options Exchange to accept inbound routes by NOS 

of (1) NOM Exchange Direct Orders without 

checking the NOM book prior to routing, and (2) 

NOM non-system securities orders, including 

Exchange Direct Orders that NOS routes from NOM. 

See Securities Exchange Act Release No. 64896 

(July 15, 2011), 76 FR 43740 (July 21, 2011)(SR–BX– 

2011–045). 

9The Exchange also states that NOS is subject to 

independent oversight by FINRA, its Designated 

Examining Authority, for compliance with financial 

responsibility requirements. See Securities 

Exchange Act Release No. 61667 (March 5, 2010), 

75 FR 11964 (March 12, 2010) (SR–Phlx–2010–36). 

10 17 CFR 240.17d–2. 

11Pursuant to the Regulatory Contract, both the 

Exchange and FINRA will collect and maintain all 

alerts, complaints, investigations and enforcement 

actions in which NOS (in routing orders to the 

Exchange) is identified as a participant that has 

potentially violated applicable Commission or 

Exchange rules. The Exchange and FINRA will 

retain these records in an easily accessible manner 

in order to facilitate any potential review conducted 

by the Commission’s Office of Compliance 

Inspections and Examinations. See Securities 

Exchange Act Release No. 61667 (March 5, 2010), 

75 FR 11964 (March 12, 2010) (SR–Phlx–2010–36). 

12The Exchange, FINRA, and SEC staff may agree 

going forward to reduce the number of applicable 

or relevant surveillances that form the scope of the 

agreed upon report. Id. 

13See NASDAQ OMX PHLX Rule 985(c)(1). 

14See supra note 7. 

securities, including Exchange Direct 

Orders.3

The text of the proposed rule change 

is available from the principle office of 

the Exchange, at the Exchange’s Web 

site at http:// 

nasdaqomxphlx.cchwallstreet.com/ 

NASDAQOMXPHLX/Filings/, 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, 

Phlx included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. Phlx 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 

Currently, NOS is the approved 

outbound routing facility of The 

NASDAQ Stock Market (the ‘‘NASDAQ 

Exchange’’) for NOM, providing 

outbound routing from NOM to other 

market centers.4 Phlx and the NASDAQ 

Exchange have previously adopted rules 

to permit Phlx to receive inbound routes 

of certain option orders, specifically (1) 

Exchange Direct Orders without 

checking the NOM book prior to 

routing, and (2) NOM non-system 

securities, from NOS on a pilot basis.5

Phlx specifically has adopted a rule to 

prevent potential information 

advantages resulting from the affiliation 

between Phlx and NOS, as related to 

NOS’s authority to route orders from 

NOM to Phlx.6 NOS’s authority to route 

these orders to Phlx is subject to a pilot 

period ending on August 25, 2011.7 The 

Exchange hereby seeks permanent 

approval to permit Phlx to accept 

inbound routes of (1) Exchange Direct 

Orders without checking the NOM book 

prior to routing, and (2) NOM nonsystem securities orders, including 

Exchange Direct Orders that NOS routes 

from NOM.8

Pursuant to prior rule filings with the 

Commission, the Phlx and NOS 

inbound routing relationship has 

operated on a pilot basis. In connection 

with this pilot program Phlx committed 

to the following: 

1. The Exchange and FINRA would 

enter into a regulatory services 

agreement (‘‘Regulatory Contract’’) 

pursuant to which FINRA has been 

allocated regulatory responsibilities to 

review NOS’s compliance with the 

Exchange’s rules through FINRA’s 

examination program.9 The Exchange, 

however, retained ultimate 

responsibility for enforcing its rules 

with respect to NOS except to the extent 

that they are covered by an agreement 

with FINRA pursuant to Rule 17d–2,10

in which case regulatory responsibility 

is allocated to FINRA as provided in 

Rule 17d–2(d). 

2. FINRA and the Exchange would 

monitor NOS for compliance with 

Phlx’s trading rules, and collect and 

maintain certain related information; 11

3. FINRA has agreed to provide a 

report to the Exchange’s Chief 

Regulatory Officer, on at least a 

quarterly basis, that: (i) Quantifies all 

alerts (of which the Exchange and 

FINRA become aware) that identify NOS 

as a participant that has potentially 

violated Commission or Exchange rules 

and (ii) quantifies the number of 

investigations that identify NOS as a 

participant that has potentially violated 

Exchange or Commission Rules; 12

4. The Exchange adopted Rule 985(c), 

which requires The NASDAQ OMX 

Group, Inc., as the holding company 

owning NOS and the Exchange, to 

establish and maintain procedures and 

internal controls reasonably designed to 

ensure that NOS does not develop or 

implement changes to its system on the 

basis of non-public information 

regarding planned changes to the 

Exchange’s systems, obtained as a result 

of its affiliation with the Exchange, until 

such information is available generally 

to similarly situated Exchange members 

in connection with the provision of 

inbound routing to the Exchange; 13 and 

5. The Exchange proposed that NOS 

be authorized to route (1) Exchange 

Direct Orders without checking the 

NOM book and (2) orders in NOM nonsystem securities inbound to the 

Exchange from NOM for a pilot period 

of twelve months, as further extended to 

August 25, 2011.14

The Exchange has met all the abovelisted conditions. By meeting the aboveconditions, the Exchange has set up 

mechanisms that protect the 

independence of the Exchange’s 

regulatory responsibility with respect to 


jlentini on DSK4TPTVN1PROD with NOTICES
52032 Federal Register / Vol. 76, No. 161 / Friday, August 19, 2011 / Notices 

15 15 U.S.C. 78f. 

16 15 U.S.C. 78f(b)(5). 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3As defined in Rule 16.1(a)(37), a ‘‘Market 

Maker’’ on BATS Options is a member of BATS 

Options registered with the Exchange for the 

purpose of making markets in options contracts 

traded on the Exchange and that is vested with the 

rights and responsibilities specified in Chapter XXII 

of the Exchange’s Rules. 

NOS, as well as demonstrated that NOS 

cannot use any information advantage it 

may have because of its affiliation with 

the Exchange. Since the Exchange has 

met all the above-listed conditions, it 

now seeks permanent approval of the 

Phlx and NOS inbound routing 

relationship. The Exchange will 

continue to comply with the conditions 

1–4 stated above. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the provisions of Section 6 of the Act,15

in general, and with Section 6(b)(5) of 

the Act,16 in particular, in that the 

proposal is designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and 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. 

Specifically, the proposed rule change 

will allow the Exchange to continue 

receiving inbound routes of certain 

orders from NOS in a manner consistent 

with prior approvals and established 

protections. The Exchange believes that 

having met the commitments 

established during the pilot program 

demonstrates that the Exchange has 

mechanisms that protect the 

independence of the Exchange’s 

regulatory responsibility with respect to 

NOS, as well as demonstrate that NOS 

cannot use any information advantage it 

may have because of its affiliation with 

the Exchange. 

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, as amended. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor 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 Exchange consents, 

the Commission will: 

A. By order approve or disapprove 

such 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 

Number SR–Phlx–2011–111 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2011–111. 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 

publicly available. All submissions 

should refer to File Number SR–Phlx– 

2011–111 and should be submitted on 

or before September 9, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–21174 Filed 8–18–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65133; File No. SR–BATS– 

2011–029] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Offer a Bulk-Quoting 

Interface 

August 15, 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 August 9, 

2011, BATS Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BATS’’) 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 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 is proposing related to 

the BATS Options Market (‘‘BATS 

Options’’) to introduce a bulk-quoting 

interface for BATS Options Market 

Makers 3 that will help them meet their 

obligations as market makers and to 


jlentini on DSK4TPTVN1PROD with NOTICES