Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 23301 

14See BYX Approval Order, 75 FR at 51304. 

15See Notice, 77 FR at 15154. 

16See id. 

17See, e.g., Securities Exchange Act Release Nos. 

54170 (July 18, 2006), 71 FR 42149 (July 25, 2006) 

(SR–NASDAQ–2006–006) (order approving 

Nasdaq’s proposal to adopt Nasdaq Rule 2140, 

restricting affiliations between Nasdaq and its 

members); 53382 (February 27, 2006), 71 FR 11251 

(March 6, 2006) (SR–NYSE–2005–77) (order 

approving the combination of the New York Stock 

Exchange, Inc. and Archipelago Holdings, Inc.); 

58673 (September 29, 2008), 73 FR 57707 (October 

8, 2008) (SR–Amex–2008–62) (order approving the 

combination of NYSE Euronext and the American 

Stock Exchange LLC); 59135 (December 22, 2008), 

73 FR 79954 (December 30, 2008) (SR–ISE–2009– 

85) (order approving the purchase by ISE Holdings 

of an ownership interest in DirectEdge Holdings 

LLC); and 59281 (January 22, 2009), 74 FR 5014 

(January 28, 2009) (SR–NYSE–2008–120) (order 

approving a joint venture between NYSE and BIDS 

Holdings L.P.). 

18This oversight will be accomplished through a 

17d–2 Agreement. See BYX Approval Order, 75 FR 

at 51304. 

19 15 U.S.C. 78s(b)(2). 

20 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

rules of an exchange not be designed to 

permit unfair discrimination among 

customers, issuers, brokers, or dealers. 

Recognizing that the Commission has 

previously expressed concern regarding 

the potential for conflicts of interest in 

instances where a member firm is 

affiliated with an exchange to which it 

is routing orders, the Exchange 

previously implemented limitations and 

conditions to BATS Trading’s affiliation 

with the Exchange to permit the 

Exchange to accept inbound orders that 

BATS Trading routes in its capacity as 

a facility of BATS, on a pilot basis.14

The Exchange now seeks to make this 

pilot permanent. Specifically, the 

Exchange states it is in compliance with 

the following limitations and 

conditions: 15

• The Exchange shall enter into a 

plan pursuant to Rule 17d-2 under the 

Exchange Act with a non-affiliated selfregulatory organization (‘‘SRO’’) to 

relieve the Exchange of regulatory 

responsibilities for BATS Trading with 

respect to rules that are common rules 

between the Exchange and the nonaffiliated SRO, and enter into a 

regulatory contract (‘‘Regulatory 

Contract’’) with a non-affiliated SRO to 

perform regulatory responsibilities for 

BATS Trading for unique Exchange 

rules. 

• The Regulatory Contract shall 

require the Exchange to provide the 

non-affiliated SRO with information, in 

an easily accessible manner, regarding 

all exception reports, alerts, complaints, 

trading errors, cancellations, 

investigations, and enforcement matters 

(collectively ‘‘Exceptions’’) in which 

BATS Trading is identified as a 

participant that has potentially violated 

Exchange or Commission Rules, and 

shall require that the non-affiliated SRO 

provide a report, at least quarterly, to 

the Exchange quantifying all Exceptions 

in which BATS Trading is identified as 

a participant that has potentially 

violated Exchange or Commission 

Rules. 

• The Exchange, on behalf of the 

Corporation, shall establish and 

maintain procedures and internal 

controls reasonably designed to ensure 

that BATS Trading does not develop or 

implement changes to its system on the 

basis of non-public information 

regarding planned changes to Exchange 

systems, obtained as a result of its 

affiliation with the Exchange, until such 

information is available generally to 

similarly situated member organizations 

of the Exchange in connection with the 

provision of inbound order routing to 

the Exchange. 

• The Exchange may furnish to BATS 

Trading the same information on the 

same terms that the Exchange makes 

available in the normal course of 

business to any other member 

organization. 

The Exchange believes that by meeting 

the above-listed conditions it has set up 

mechanisms that protect the 

independence of the Exchange’s 

regulatory responsibility with respect to 

BATS Trading, and has demonstrated 

that BATS Trading cannot use any 

information that it may have because of 

its affiliation with the Exchange to its 

advantage.16

In the past, the Commission has 

expressed concern that the affiliation of 

an exchange with one of its members 

raises potential conflicts of interest, and 

the potential for unfair competitive 

advantage.17 Although the Commission 

continues to be concerned about 

potential unfair competition and 

conflicts of interest between an 

exchange’s self-regulatory obligations 

and its commercial interest when the 

exchange is affiliated with one of its 

members, for the reasons discussed 

below, the Commission believes that it 

is consistent with the Act to permit 

BATS Trading, in its capacity as a 

facility of BATS, to provide inbound 

routing to the Exchange on a permanent 

basis instead of a pilot basis, subject to 

the other conditions described above. 

The Exchange has proposed four 

ongoing conditions applicable to BATS 

Trading’s inbound routing activities in 

its capacity as a facility of BATS, which 

are enumerated above. The Commission 

believes that these conditions mitigate 

its concerns about potential conflicts of 

interest and unfair competitive 

advantage. In particular, the 

Commission believes that a nonaffiliated SRO’s oversight of BATS 

Trading,18 combined with a nonaffiliated SRO’s monitoring of BATS 

Trading’s compliance with the 

Exchange’s rules and quarterly reporting 

to the Exchange, will help to protect the 

independence of the Exchange’s 

regulatory responsibilities with respect 

to BATS Trading. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,19 that the 

proposed rule change (SR–BYX–2012– 

006) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9341 Filed 4–17–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66799; File No. SR–Phlx– 

2012–38] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

FINRA Fees 

April 12, 2012. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on April 11, 

2012, NASDAQ OMX PHLX LLC 

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

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘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 amend the 

Exchange’s Pricing Schedule at Section 

VII, C to update FINRA fees to mirror 

the text of The NASDAQ Stock Market 

LLC (‘‘NASDAQ Stock Market’’) and 

NASDAQ OMX BX, Inc. (‘‘BX’’). 

The text of the proposed rule change 

is available on the Exchange’s Web site 

mstockstill on DSK4VPTVN1PROD with NOTICES

23302 Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 

3Rule 7003(a)(6) and (b) are specific to NASDAQ 

Stock Market and not applicable to Phlx. Also the 

NASDAQ Stock Market rule has a reference to 

NASD which is being reflected as FINRA in the 

Exchange’s proposed rule text similar to the text of 

BX Rule 7003. 4Rule 7003(a)(6) and (b) are specific to BX and 

not applicable to Phlx. 5The Phlx Pricing Schedule calculates the cost of 

the FINRA fingerprint processing fee ($13) together 

with the pass through fee imposed by the United 

States Department of Justice (‘‘DOJ’’) while 

NASDAQ Stock Market Rule 7003(a)(4) and (5) and 

BX Rule 7003(a)(4) and (5) only displays the $13 

FINRA fingerprint processing fee and does not 

display the pass-through amount to the DOJ but 

rather notes such a cost is assessed by FINRA. 

6FINRA notified its members through an 

Information Notice that there was a reduction to the 

DOJ pass-through fee from $17.25 to $14.50. The 

amounts currently displayed for fingerprint 

processing fees on Phlx’s Pricing Schedule would 

therefore need to be amended from $30.25 to $27.50 

to update the current Pricing Schedule. However, 

the proposed amendment to the Pricing Schedule 

would only reference the FINRA fees and would not 

reference the DOJ pass-through fees therefore 

obviating the amendment to the proposed text to 

display the price decrease as the exact DOJ fee 

would no longer be displayed. 

7 15 U.S.C. 78f(b). 

8 15 U.S.C. 78f(b)(5). 

9 15 U.S.C. 78s(b)(3)(A). 

10 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

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 Exchange has satisfied this 

requirement. 11 17 CFR 240.19b–4(f)(6). 12For 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). 

at http://www.nasdaqtrader.com/micro.

aspx?id=PHLXRulefilings, at the 

principal office of the Exchange, on the 

Commission’s Web site at http://www.

sec.gov, 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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to both amend and update the 

Exchange’s FINRA fees on its Pricing 

Schedule at Section VII, C entitled 

‘‘FINRA Fees’’ to mirror the rules of the 

NASDAQ Stock Market and BX. 

Currently, the Exchange displays all the 

FINRA fees that are billed and collected 

by FINRA at Section VII, C on behalf of 

the Exchange. The Exchange is 

proposing to replace the relevant text in 

the Pricing Schedule with text similar to 

that of NASDAQ Stock Market Rule 

7003(a)(1)—(5) 3 and BX Rule 

7003(a)(1)—(5).4 This amendment 

would serve to (1) conform the 

Exchange’s Pricing Schedule to that of 

NASDAQ Stock Market and BX rules in 

order to avoid confusion over similar 

FINRA fees listed in those rules, 

however reflected differently on the 

Phlx Pricing Schedule as compared to 

the NASDAQ Stock Market and BX 

Rules with respect to DOJ related costs;5

and (2) update Phlx’s current fees so 

that the fees comport with a recent 

amendment to the DOJ pass-through 

fee,6 which is billed and collected by 

FINRA. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 7 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 8

in particular, in that it is designed to 

promote just and equitable principles of 

trade, 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, by 

conforming the text of the Exchange’s 

Pricing Schedule regarding certain fees 

billed and collected by FINRA to that of 

the NASDAQ Stock Market Rule and 

BX, to the extent the fees apply to the 

Exchange, so that there is no confusion 

as to the amount of fees which are 

similarly billed and collected by FINRA 

to members of the various exchanges. 

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 

Because the 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 prior to 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 19(b)(3)(A) 

of the Act 9 and Rule 19b–4(f)(6) 

thereunder.10

A proposed rule change filed 

pursuant to Rule 19b–4(f)(6) under the 

Act 11 normally does not become 

operative for 30 days after the date of its 

filing. However, Rule 19b–4(f)(6) 

permits the Commission to designate a 

shorter time if such action is consistent 

with the protection of investors and the 

public interest. The Exchange has 

requested that the Commission waive 

the 30-day operative delay and 

designate the proposed rule change 

operative upon filing. The Commission 

believes that waiving the 30-day 

operative delay is consistent with the 

protection of investors and the public 

interest and, therefore, designates the 

proposal operative upon filing.12 The 

proposed rule change is not 

controversial as it would conform the 

text of the Exchange’s Pricing Schedule 

to similar rule text on the NASDAQ 

Stock Market and BX. In addition, the 

proposed rule change would update the 

Exchange’s Pricing Schedule to make 

the amount of the FINRA fingerprinting 

fees displayed on the Pricing Schedule 

accurate. 

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– 

Phlx–2012–38 on the subject line. 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 75 / Wednesday, April 18, 2012 / Notices 23303 

13 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. 66021 

(December 21, 2011), 76 FR 81551 (December 28, 

2011) (SR–FINRA–2011–63) [sic]. 

4See Securities Exchange Act Release No. 65544 

(October 12, 2011), 76 FR 64406 (October 18, 2011) 

(SR–NYSEArca–2011–69). 

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–2012–38. 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 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–Phlx–2012–38 and should 

be submitted on or before May 9, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9290 Filed 4–17–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66798; File No. SR– 

NYSEArca–2012–27] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Adopt Recent 

Changes to FINRA Rules 7440 and 

7450, and To Adopt Recent Changes to 

FINRA Rule 5320 by Amending 

Commentary .02 to NYSE Arca Equities 

Rule 5320 To Require That ETP 

Holders Report to the Order Audit Trail 

System Information Barriers Put Into 

Place by the ETP Holder in Reliance on 

Commentary .02 to NYSE Arca Equities 

Rule 5320 

April 12, 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 April 2, 

2012, NYSE Arca, Inc. (‘‘Exchange’’ or 

‘‘NYSE Arca’’) 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 proposes to (i) adopt 

recent changes to Financial Industry 

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

Rules 7440 and 7450, which the 

Exchange has incorporated by reference 

in its own rules, and (ii) adopt recent 

changes to FINRA Rule 5320 by 

amending Commentary .02 to NYSE 

Arca Equities Rule 5320 to require that 

ETP Holders report to the Order Audit 

Trail System (‘‘OATS’’) information 

barriers put into place by the ETP 

Holder in reliance on Commentary .02 

to NYSE Arca Equities Rule 5320. The 

text of the proposed rule change is 

available at the Exchange, www.nyse.

com, the Commission’s Public Reference 

Room, and the Commission’s Web site 

at www.sec.gov. 

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 

self-regulatory organization 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 those 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 parts 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 proposes to (i) adopt 

recent changes to FINRA Rules 7440 

and 7450, which the Exchange has 

incorporated by reference in its own 

rules, and (ii) adopt recent changes to 

FINRA Rule 5320 by amending 

Commentary .02 to NYSE Arca Equities 

Rule 5320 to require that ETP Holders 

report to OATS information barriers put 

into place by the ETP Holders in 

reliance on Commentary .02 to NYSE 

Arca Equities Rule 5320. 

FINRA recently received Commission 

approval of changes to the order 

recording and transmission 

requirements of the OATS rules in 

FINRA Rules 7440 and 7450.3 First, 

FINRA amended FINRA Rule 7440 to 

require FINRA members relying on the 

no-knowledge exception in 

Supplementary Material .02 to FINRA 

Rule 5320 (Prohibition Against Trading 

Ahead of Customer Orders) to report 

information to OATS regarding the 

information barriers adopted by the 

member in reliance on the exception— 

FINRA also added this requirement 

under Supplementary Material .02 to 

FINRA Rule 5320. Second, FINRA 

amended FINRA Rule 7440 to extend, to 

all OATS-eligible securities, the existing 

requirement to reflect on OATS reports 

a customer’s instruction regarding 

display of the customer’s limit orders— 

the requirement previously applied only 

to limit orders involving NMS stocks. 

Finally, FINRA amended FINRA Rule 

7450 to codify the specific time by 

which OATS reports must be 

transmitted to FINRA. 

The Exchange recently adopted the 

NYSE Arca Equities Rule 7400 Series, 

which consists of NYSE Arca Equities 

Rules 7410 through 7470 and is based 

substantially on the FINRA Rule 7400 

Series.4 In this regard, NYSE Arca 

Equities Rules 7440 and 7450 

mstockstill on DSK4VPTVN1PROD with NOTICES