8936 Federal Register / Vol. 77, No. 31 / Wednesday, February 15, 2012 / Notices 

22 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 65717 

(November 9, 2011), 76 FR 70784 (November 15, 

2011) (SR–NASDAQ–2011–150). 

4After the initial designation of NASDAQ MPIDs 

for EHIP use, a member may add or remove such 

EHIP designations for existing MPIDs, provided that 

NASDAQ must be appropriately notified of such a 

change on or before the first trading day of the 

month when the change is to become effective. A 

newly established MPID may be designated for 

EHIP use immediately upon establishment. 

5Originally, the rebate was set at $0.0001 per 

share executed, but effective February 1, 2012, 

NASDAQ increased the rate to $0.0002 per share 

executed. See SR–NASDAQ–2012–020 (January 27, 

2012). 

6Formerly, the PMI Execution Ratio. 

7 ‘‘Market Hours Immediate-or-Cancel’’ or 

‘‘System Hours Immediate-or-Cancel’’ orders. 

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 No. SR–Phlx–2012– 

15 and should be submitted on or before 

March 7, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.22

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3536 Filed 2–14–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66369; File No. SR– 

NASDAQ–2012–024] 

Self-Regulatory Organizations; the 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Modify 

NASDAQ’s Pre-Market Investor 

Program 

February 10, 2012. 

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 

1, 2012, The NASDAQ Stock Market 

LLC (‘‘NASDAQ’’ or ‘‘Exchange’’), filed 

with the Securities and Exchange 

Commission (‘‘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 

NASDAQ is proposing to modify its 

NASDAQ’s Pre-Market Investor 

Program. NASDAQ proposes to 

implement the proposed rule change on 

February 1, 2011. The text of the 

proposed rule change is available at 

http://nasdaq.cchwallstreet.com/, at 

NASDAQ’s principal office, 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 IV below. The 

Exchange 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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Last year, NASDAQ introduced a PreMarket Investor Program to encourage 

greater use of NASDAQ’s facilities for 

trading before the market open at 9:30 

a.m. and through the trading day.3 The 

goal of the program is to encourage the 

development of a deeper, more liquid 

trading book during pre-market hours, 

while also recognizing the correlation 

observed by NASDAQ between levels of 

liquidity provided during pre-market 

hours and levels provided during 

regular trading hours. While 

maintaining the structure of the existing 

program, NASDAQ is now proposing to 

modify the program to also encourage 

greater use of NASDAQ’s facilities for 

trading after the market close at 4 p.m. 

In connection with the change, 

NASDAQ will also rename the program 

as the ‘‘Extended Hours Investor 

Program’’ (‘‘EHIP’’). 

Under the program, a member is 

required to designate one or more 

market participant identifiers (‘‘MPIDs’’) 

for use under the program.4 The 

member will then qualify for an extra 

rebate of $0.0002 per share executed 5

with respect to all displayed liquidity 

provided through a designated MPID 

that executes at a price of $1 or more 

during the month if the following 

conditions are met: 

(1) The MPID’s ‘‘EHIP Execution 

Ratio’’ 6 for the month is less than 10. 

The EHIP Execution Ratio is defined as 

‘‘the ratio of (A) the total number of 

liquidity-providing orders entered by a 

member through an EHIP-designated 

MPID during the specified time period 

to (B) the number of liquidity-providing 

orders entered by such member through 

such EHIP-designated MPID and 

executed (in full or partially) in the 

Nasdaq Market Center during such time 

period; provided that: (i) No order shall 

be counted as executed more than once; 

and (ii) no Pegged Orders, odd-lot 

orders, or MIOC or SIOC orders 7 shall 

be included in the tabulation.’’ Thus, 

the requirement stipulates that a high 

proportion of potentially liquidityproviding orders entered through the 

MPID actually execute and provide 

liquidity. This requirement is designed 

to focus the availability of the program 

on members representing retail and 

institutional customers. 

(2) Currently, the member must 

provide an average daily volume of 2 

million or more shares of liquidity 

during the month using orders that are 

executed prior to NASDAQ’s Opening 

Cross. NASDAQ has observed that 

members that provide higher volumes of 

liquidity-providing orders during the 

pre-market hours generally do so 

throughout the rest of the trading day. 

Accordingly, the program pays a credit 

with respect to all liquidity-providing 

orders, but only in the event that 

comparatively large volumes of such 

orders execute in pre-market hours. To 

broaden the focus of the program to 

include after-hours trading, NASDAQ is 

proposing to modify this provision to 

provide an alternative criterion for 

participation in the program, but 

without removing or modifying the 


sroberts on DSK5SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 31 / Wednesday, February 15, 2012 / Notices 8937 

8http://www.directedge.com/Membership/ 

FeeSchedule/EDGXFeeSchedule.aspx. 

9 15 U.S.C. 78f. 

10 15 U.S.C. 78f(b)(4) and (5). 

11http://www.directedge.com/Membership/ 

FeeSchedule/EDGXFeeSchedule.aspx. 

12 15 U.S.C. 78s(b)(3)(a)(ii)[sic]. 

13 17 CFR 240.19b–4(f)(2). 

existing criteria. Specifically, a member 

may also satisfy the volume requirement 

if the member provides an average daily 

volume of 3 million or more shares of 

liquidity during the month using orders 

that are entered through its designated 

MPID and executed prior to the Nasdaq 

Opening Cross and/or after the Nasdaq 

Closing Cross. Thus, the modified 

volume criteria may be satisfied either 

through substantial activity during premarket trading hours, or by substantial 

activity spread across the pre-market 

and after-hours trading sessions. 

(3) The ratio between shares of 

liquidity provided through the MPID 

and total shares accessed, provided, or 

routed through the MPID during the 

month is at least 0.80. This requirement 

reflects the program’s goal of 

encouraging members that provide high 

levels of liquidity in the pre-market 

and/or after-hours trading sessions to 

also do so during the rest of the trading 

day. 

The modified program is similar to a 

fee provision of the EDGX Exchange 

under which a favorable execution fee 

and rebate are offered to members that 

make significant use of the EDGX 

Exchange’s facilities during pre-market 

and/or post-market hours.8

2. Statutory Basis 

NASDAQ believes that the proposed 

rule change is consistent with the 

provisions of Section 6 of the Act,9 in 

general, and with Sections 6(b)(4) and 

(5) of the Act,10 in particular, in that it 

provides for the equitable allocation of 

reasonable dues, fees and other charges 

among members and issuers and other 

persons using any facility or system 

which NASDAQ operates or controls, 

and is not designed to permit unfair 

discrimination between customers, 

issuers, brokers or dealers. All similarly 

situated members are subject to the 

same fee structure, and access to 

NASDAQ is offered on fair and nondiscriminatory terms. 

The Pre-Market Investor Program, 

now renamed with Extended Hours 

Investment Program, is designed to 

attract greater liquidity to NASDAQ, 

with a particular emphasis on 

encouraging a deeper and more liquid 

book during pre-market and post-market 

hours and recognizing and further 

encouraging the observed correlation 

between liquidity provision during premarket and post-market hours and 

throughout the trading day. The EHIP 

provides an additional credit to 

members that satisfy criteria designed to 

be indicative these patterns of market 

participation. Thus, a participant in the 

program is required to designate MPIDs 

with a low ratio between orders entered 

and executions; to provide a specified 

volume of liquidity during pre-market 

hours, or pre-market and/or post-market 

hours; and to maintain a high ratio of 

liquidity provision to order execution 

throughout the month. 

The EHIP is not unfairly 

discriminatory because it is intended to 

promote submission of liquidityproviding orders to NASDAQ, which 

benefits all NASDAQ members and all 

investors. Likewise, the EHIP is 

consistent with the Act’s requirement 

for the equitable allocation of reasonable 

dues, fees, and other charges. Members 

who choose to significantly increase the 

volume of EHIP-eligible liquidityproviding orders that they submit to 

NASDAQ would be benefitting all 

investors, and therefore providing 

credits to such members, as 

contemplated in the proposed enhanced 

program, is equitable. Moreover, 

NASDAQ believes that the level of the 

credit—$0.0002 per share, in addition to 

credits ranging from $0.0020 to 

$0.00295 per share for displayed 

liquidity under NASDAQ regular 

transaction execution fee and rebate 

schedule—is reasonable. 

NASDAQ further believes that 

expanding the program to incentivize 

greater participation in the after-hours 

trading session is not unfairly 

discriminatory, because it will promote 

still further the provision of liquidity, 

which benefits all market participants, 

and will broaden the availability of the 

offered rebate to a greater number of 

market participants. Similarly, 

NASDAQ believes that the expansion of 

the program is consistent with the 

equitable allocation of fees, because it 

will further incentivize members to 

provide liquidity. NASDAQ further 

believes that the expansion is 

reasonable, because it will reduce the 

fees paid by a larger number of market 

participants. 

Finally, NASDAQ notes that it 

operates in a highly competitive market 

in which market participants can 

readily favor competing venues if they 

deem fee levels at a particular venue to 

be excessive, or rebate opportunities 

available at other venues to be more 

favorable. In such an environment, 

NASDAQ must continually adjust its 

fees to remain competitive with other 

exchanges and with alternative trading 

systems that have been exempted from 

compliance with the statutory standards 

applicable to exchanges. NASDAQ 

believes that all aspects of the proposed 

rule change reflect this competitive 

environment because the change is 

designed to increase the credits 

provided to members that enhance 

NASDAQ’s market quality through 

liquidity provision. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

NASDAQ does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended. 

Because the market for order execution 

is extremely competitive, members may 

readily opt to disfavor NASDAQ’s 

execution services if they believe that 

alternatives offer them better value. The 

proposed changes will enhance 

competition by offering a higher rebate 

to more market participants. In addition, 

the change will enhance competition 

with the EDGX Exchange, which 

encourages participation in its premarket and post-market trading sessions 

by means of favorable pricing offered to 

members that are active during premarket and/or post-market hours.11

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 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act 12 and 

subparagraph (f)(2) of Rule 19b–4 

thereunder.13 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. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or 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. 


sroberts on DSK5SPTVN1PROD with NOTICES
8938 Federal Register / Vol. 77, No. 31 / Wednesday, February 15, 2012 / Notices 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 65700 

(November 7, 2011), 76 FR 70523 (November 14, 

2011). 

4See Letter from Pat Nelson, dated November 30, 

2011 (‘‘Nelson’’); George Hessler, Stock USA 

Execution Services, Inc., to Marcia Asquith, 

Secretary, FINRA, dated November 25, 2011 (‘‘Stock 

USA’’); Holly H. Smith and Susan S. Krawczyk, 

Sutherland Asbill & Brennan LLP, for the 

Committee of Annuity Insurers, to Elizabeth M. 

Murphy, Secretary, SEC, dated December 5, 2011 

(‘‘CAI’’); Howard Spindel and Cassondra E. Joseph, 

Integrated Management Solutions USA LLC, dated 

December 5, 2011 (‘‘IMS letter’’); Nancy Brda to 

Elizabeth M. Murphy, Newedge USA, LLC, dated 

December 5, 2011 (‘‘Newedge’’) (Available at 

http://www.sec.gov/comments/sr-finra-2011-064/

finra2011064.shtml). 

5Amendment No. 1, dated February 8, 2012, was 

withdrawn on February 8, 2012. 

6See Amendment No. 2 dated February 8, 2012 

(‘‘Amendment No. 2’’). The text of Amendment No. 

2 is available on FINRA’s Web site at 

http:www.finra.org, at the principal office of FINRA, 

and on the Commission’s Web site, http:// 

www.sec.gov/rules/sro.shtml. 7 17 CFR 240.17a–5. 

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 email to rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2012–024 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–NASDAQ–2012–024. This 

file number should be included on the 

subject line if email 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 

10:00 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– 

NASDAQ–2012–024 and should be 

submitted on or before March 7, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3556 Filed 2–14–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66364; File No. SR–FINRA– 

2011–064] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Amendment No. 2 and Order Granting 

Accelerated Approval of a Proposed 

Rule Change, as Modified by 

Amendment No. 2, Adopting FINRA 

Rule 4524 (Supplemental FOCUS 

Information) and Proposed 

Supplementary Schedule to the 

Statement of Income (Loss) Page of 

FOCUS Reports 

February 9, 2012. 

I. Introduction 

On November 1, 2011, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Exchange Act’’) 1 and Rule 

19b–4 thereunder,2 proposed FINRA 

Rule 4524 (Supplemental FOCUS 

Information) to require each member, as 

FINRA shall designate, to file such 

additional financial or operational 

schedules or reports as FINRA may 

deem necessary as a supplement to the 

FOCUS report. The proposed rule 

change was published for comment in 

the Federal Register on November 14, 

2011.3 The Commission received five 

comments on the proposed rule 

change.4 FINRA filed Amendment No. 1 

on February 8, 2012, which was 

subsequently withdrawn.5 FINRA filed 

Amendment No. 2 to the proposed rule 

change on February 8, 2012.6 The 

Commission is publishing this notice 

and order to solicit comments on 

Amendment No. 2 and to approve the 

proposed rule change, as modified by 

Amendment No. 2, on an accelerated 

basis. 

II. Description of Proposed Rule Change 

Pursuant to Exchange Act Rule 17a– 

5, FINRA members are required to file 

with FINRA reports concerning their 

financial and operational status using 

SEC Form X–17A–5, Financial and 

Operational Combined Uniform Single 

(FOCUS) Report.7 FINRA is proposing 

to adopt FINRA Rule 4524, which 

provides that as a supplement to filing 

FOCUS reports pursuant to Exchange 

Act Rule 17a–5 and FINRA Rule 2010, 

each member, as FINRA shall designate, 

shall file such additional financial or 

operational schedules or reports as 

FINRA may deem necessary or 

appropriate for the protection of 

investors or in the public interest. 

FINRA Rule 4524 also provides that 

FINRA will specify the content of such 

additional schedules or reports, their 

format, and the timing and the 

frequency of such supplemental filings 

in a Regulatory Notice (or similar 

communication) issued pursuant to the 

Rule. Finally, FINRA Rule 4524 

provides that FINRA will file with the 

Commission pursuant to Exchange Act 

Section 19(b) the content of any such 

Regulatory Notice (or similar 

communication) issued pursuant to the 

Rule. 

Pursuant to proposed FINRA Rule 

4524, FINRA is proposing a 

Supplemental Statement of Income 

(‘‘SSOI’’) to magnify the data from the 

Statement of Income (Loss) page of the 

FOCUS Reports. The proposed SSOI is 

intended to capture more granular detail 

of a firm’s revenue and expense 

information. The lack of more specific 

revenue and expense categories for 

certain business activities on the 

Statement of Income (Loss) page of the 

FOCUS Reports has led many firms to 

report much of their revenue and 

expenses as ‘‘other’’ (miscellaneous), a 

very general categorization that provides 

FINRA limited visibility into revenue 

and expense trends. The proposed SSOI 

is divided into sections containing line 

items that seek additional detail to 

permit FINRA to better understand 

revenue sources and expense 

composition on an ongoing basis. This 

additional detail would allow FINRA to 

better assess risk at a firm, and as a 

result, better allocate examination 

resources. As modified by Amendment 

No. 2, each member would be required 


sroberts on DSK5SPTVN1PROD with NOTICES