14454 Federal Register / Vol. 77, No. 47 / Friday, March 9, 2012 / Notices 

10See supra note 6. 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

4See Rule 6730(a). In transactions between 

members, each member must report the trade, and 

for transactions between a member and a customer, 

the member must report the trade. 

5Under Rule 6710(e), ‘‘customer’’ includes a 

broker-dealer that is not a FINRA member. 

6See www.finra.org/Industry/Compliance/ 

MarketTransparency/TRACE/FAQ/ 

P125244#reporting (FAQ: Who reports trades 

executed through electronic trading systems that are 

themselves broker-dealers? All FINRA members 

that are ‘‘parties to a transaction’’ have a trade 

reporting obligation under TRACE Rules. Where 

two FINRA members effect/execute a transaction 

through an electronic trading system that is 

registered as a broker-dealer, both members, as well 

as the electronic trading system would have a trade 

reporting obligation). 

securities exchanges and does not raise 

any new regulatory issues.10 For these 

reasons, the Commission designates the 

proposed rule change as operative upon 

filing. 

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 email to rule-comments@

sec.gov. Please include File Number SR– 

BX–2012–011 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–BX–2012–011. 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/vsro.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– 

2012–011 and should be submitted on 

or before March 30, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–5731 Filed 3–8–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66513; File No. SR–FINRA– 

2012–016] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Allow FINRA To 

Exempt Certain Alternative Trading 

Systems From the Trade Reporting 

Obligation Under the Trade Reporting 

and Compliance Engine (‘‘TRACE’’) 

Reporting Rules 

March 5, 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 

28, 2012, the Financial Industry 

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

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 FINRA. FINRA has 

designated the proposed rule change as 

constituting a non-controversial rule 

change under Rule 19b–4(f)(6) under the 

Act,3 which renders the proposal 

effective upon filing with the 

Commission. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to adopt new 

Rule 6731 to provide FINRA with 

authority to exempt a member 

alternative trading system (‘‘ATS’’) that 

meets the specified criteria from the 

trade reporting obligation under the 

Rule 6700 Series. In addition, FINRA is 

proposing a conforming change to Rule 

9610 to specify that FINRA has 

exemptive authority under proposed 

Rule 6731. 

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA included statements concerning 

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. FINRA 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 

A member that is a ‘‘Party to a 

Transaction’’ as defined in FINRA Rule 

6710(e) in a transaction in a TRACEEligible Security must report the trade 

to TRACE under Rule 6730(a).4 ‘‘Party 

to a Transaction’’ is defined as ‘‘an 

introducing broker-dealer, if any, an 

executing broker-dealer, or a 

customer.’’ 5 An ATS, which term 

includes electronic communications 

networks, is a Party to a Transaction and 

has a trade reporting obligation when a 

transaction in a TRACE-Eligible 

Security is executed through the ATS.6

FINRA is proposing to adopt new 

Rule 6731 to provide FINRA with 

authority to exempt, upon application 

and subject to specified terms and 

conditions, a member ATS from the 


srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 47 / Friday, March 9, 2012 / Notices 14455 

7FINRA reminds members of their books and 

records obligations under FINRA rules, the 

Exchange Act and applicable Exchange Act rules. 

Thus, any ATS that is granted an exemption under 

the proposed rule change would be required to 

retain the written agreements and be able to 

produce them to FINRA upon request. 

8 17 CFR 242.300–303. 

9FINRA notes that where an ATS has been 

granted an exemption under the proposed rule, the 

member subscribers will be assessed the Trading 

Activity Fee under FINRA By-Laws, Schedule A, 

§ 1. The ATS will not be assessed such fees. 10 15 U.S.C. 78o–3(b)(6). 

obligation to report a transaction in a 

TRACE-Eligible Security under certain 

limited circumstances. FINRA will only 

grant an exemption where all of the 

conditions set forth in the proposed rule 

are satisfied. 

First, trades must be between ATS 

subscribers that are both FINRA 

members. For any trades between nonmembers, or a FINRA member and a 

customer (which includes a brokerdealer that is not a FINRA member), the 

exemption will not apply, and the ATS 

will have a trade reporting obligation 

under Rule 6730. 

The ATS also must demonstrate that 

it meets the following criteria. First, the 

member subscribers must be fully 

disclosed to one another at all times on 

the ATS. Second, although the system 

brings together the orders of buyers and 

sellers and uses established, nondiscretionary methods under which 

such orders interact with each other, the 

system does not permit automatic 

execution. A member subscriber must 

take affirmative steps beyond the 

submission of an order to agree to a 

trade with another member subscriber. 

Third, the trade does not pass through 

any ATS account, and the ATS does not 

in any way hold itself out to be a party 

to the specific trade. Fourth, the ATS 

does not exchange TRACE-Eligible 

Securities or funds on behalf of the 

member subscribers, take either side of 

the trade for clearing or settlement 

purposes, including, but not limited to, 

at DTC or otherwise, or in any other way 

insert itself into the trade. 

In addition, the ATS and the member 

subscribers must acknowledge and agree 

in writing that the ATS shall not be 

deemed a party to the specific trade for 

purposes of trade reporting and that 

trades shall be reported by each member 

subscriber that satisfies the definition of 

‘‘Party to a Transaction’’ under Rule 

6710. An ATS that is granted an 

exemption must obtain such written 

agreements from all of its member 

subscribers prior to relying on the 

exemption.7

Finally, the ATS must agree to 

provide to FINRA on a monthly basis, 

or such other basis as prescribed by 

FINRA, data relating to the volume of 

trades in TRACE-Eligible Securities 

executed by the ATS’s member 

subscribers using the ATS’s system (e.g., 

number of trades, number of bonds (or 

notes, etc.) traded and total settlement 

value for each TRACE-Eligible Security 

traded). Importantly, although an ATS 

exempted under the proposed rule will 

not have trade reporting obligations 

under FINRA rules, the trading 

occurring through the ATS is still 

considered volume of the ATS for 

purposes of, among other things, the 

recordkeeping requirements of Rule 302 

of SEC Regulation ATS 8 and 

determining whether the ATS triggers 

the Fair Access requirements under 

Rule 301(b)(5) of Regulation ATS or the 

Capacity, Integrity and Security of 

Automated Systems requirements of 

Rule 301(b)(6) of Regulation ATS, as 

applicable. The ATS also must 

acknowledge that failure to report such 

data to FINRA, in addition to 

constituting a violation of FINRA rules, 

will result in revocation of any 

exemption granted pursuant to the 

proposed rule change. 

Where an exemption is granted, the 

ATS will not be deemed a Party to a 

Transaction for purposes of FINRA trade 

reporting rules and will not be 

identified in trade reports submitted to 

FINRA. As expressly stated in the 

proposed rule, the trade must be 

reported to FINRA by the member 

subscribers that also are Parties to a 

Transaction under Rule 6710(e).9 For 

example, FINRA member BD1 displays 

a quote through ATS X and member 

BD2 routes an order to BD1 for the price 

and size of BD1’s quote using a 

messaging system provided by ATS X. 

BD1 does not subsequently re-route the 

order and executes the trade. Assuming 

that ATS X meets all of the criteria set 

forth in the proposed rule and has been 

granted an exemption by FINRA, it will 

not be deemed a Party to the 

Transaction for trade reporting purposes 

and should not be identified as such in 

the trade report submitted to FINRA. In 

this example, BD1 and BD2 would each 

have a reporting obligation under Rule 

6730. 

FINRA believes that the proposed rule 

change will reduce potential confusion 

and possible misreporting by clearly 

identifying the member with the trade 

reporting obligation in this instance. 

FINRA believes that an ATS that 

satisfies all conditions of the proposed 

rule change has a more limited 

involvement in the trade execution than 

the member subscribers and therefore 

the proposed exemption is appropriate 

in this narrow instance. FINRA expects 

that a large majority of ATSs will not 

qualify for the exemption, and the 

proposed rule change will not result in 

a change to their reporting. 

FINRA also is proposing a conforming 

change to Rule 9610 to add proposed 

Rule 6731 to the list of rules pursuant 

to which FINRA has exemptive 

authority. 

FINRA has filed the proposed rule 

change for immediate effectiveness and 

has requested that the SEC waive the 

requirement that the proposed rule 

change not become operative for 30 days 

after the date of the filing, such that 

FINRA can implement the proposed 

rule change on the date of filing. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,10 which 

requires, among other things, that 

FINRA rules be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, and, in general, to 

protect investors and the public interest. 

FINRA believes that the proposed rule 

change will reduce potential confusion 

and possible misreporting and enhance 

market transparency by clearly 

identifying the member with the trade 

reporting obligation under Rule 6730. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA 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. 

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 

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 if consistent with the 

protection of investors and the public 

interest, the proposed rule change has 

become effective pursuant to Section 


srobinson on DSK4SPTVN1PROD with NOTICES
14456 Federal Register / Vol. 77, No. 47 / Friday, March 9, 2012 / Notices 

11 15 U.S.C. 78s(b)(3)(A). 

12 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires FINRA to give 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 date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. The Commission has waived the fiveday prefiling requirement in this case. 

13See Securities Exchange Act Release No. 65695 

(November 4, 2011), 76 FR 70190 (November 10, 

2011) (approving FINRA–2011–051). 

14For 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). 15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3All Other Options refers to non-Penny Pilot 

options. The Penny Pilot was established in March 

2008 and in October 2009 was expanded and 

extended through June 30, 2012. See Securities 

Exchange Act Release Nos. 57579 (March 28, 2008), 

73 FR 18587 (April 4, 2008)(SR–NASDAQ–2008– 

026)(notice of filing and immediate effectiveness 

establishing Penny Pilot); 60874 (October 23, 2009), 

74 FR 56682 (November 2, 2009)(SR–NASDAQ– 

2009–091)(notice of filing and immediate 

effectiveness expanding and extending Penny 

Pilot); 60965 (November 9, 2009), 74 FR 59292 

(November 17, 2009)(SR–NASDAQ–2009– 

097)(notice of filing and immediate effectiveness 

adding seventy-five classes to Penny Pilot); 61455 

(February 1, 2010), 75 FR 6239 (February 8, 

2010)(SR–NASDAQ–2010–013)(notice of filing and 

immediate effectiveness adding seventy-five classes 

to Penny Pilot); 62029 (May 4, 2010), 75 FR 25895 

(May 10, 2010) (SR–NASDAQ–2010–053)(notice of 

filing and immediate effectiveness adding seventyfive classes to Penny Pilot); and 65969 (December 

15, 2011), 76 FR 79268 (December 21, 2011) (SR– 

NASDAQ–2011–169) (notice of filing and 

immediate effectiveness extension and replacement 

of Penny Pilot). See also NOM Rules, Chapter VI, 

Section 5. 

19(b)(3)(A) of the Act 11 and Rule 19b– 

4(f)(6) thereunder.12

FINRA 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 waiver of the 

operative delay is consistent with the 

protection of investors and the public 

interest. The proposed rule change is 

based on FINRA Rules 6183 and 6625, 

which provide FINRA authority to 

exempt certain ATSs from equity trade 

reporting. Those rules were recently 

proposed, noticed for public comment, 

and approved by the Commission.13 The 

conditions and applicability of the 

proposed Rule 6731 are substantively 

identical. Therefore, the Commission 

designates the proposal operative upon 

filing.14

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 email to rulecomments@sec.gov. Please include File 

Number SR–FINRA–2012–016 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–FINRA–2012–016. 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 a.m. and 3 p.m. Copies of such filing 

also will be available for Web site 

viewing and printing at the principal 

office of FINRA. 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–FINRA– 

2012–016 and should be submitted on 

or before March 30, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–5779 Filed 3–8–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66515; File No. SR– 

NASDAQ–2012–033] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Fees and Rebates in Penny Pilot 

Options and Non-Penny Pilot Options 

March 5, 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 

29, 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 NASDAQ. 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 proposes to modify pricing 

for NASDAQ members using the 

NASDAQ Options Market (‘‘NOM’’), 

NASDAQ’s facility for executing and 

routing standardized equity and index 

options. Specifically, NASDAQ 

proposes to amend Section 2 of Chapter 

XV of NOM Rules to increase 

transaction fees for adding and 

removing liquidity in All Other 

Options 3 as well as the Customer 

Rebate to Add Liquidity in Penny Pilot 

Options (‘‘Penny Options’’). 

While changes to the Fee Schedule 

pursuant to this proposal are effective 

upon filing, the Exchange has 

designated these changes to be operative 

on March 1, 2012. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http:// 

www.nasdaq.cchwallstreet.com, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 


srobinson on DSK4SPTVN1PROD with NOTICES