Federal Register / Vol. 74, No. 70 / Tuesday, April 14, 2009 / Notices 17243 

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

6 15 U.S.C. 78s(b)(3)(A)(ii). 

7 17 CFR 240.19b–4(f)(2). 

8 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(1). 

5Rule 2010 (Standards of Commercial Honor and 

Principles of Trade). 

6NASD Rule 2210 (Communications with the 

Public). 

Act,5 in particular, in that it is designed 

to provide for the equitable allocation of 

reasonable dues, fees, and other charges 

among its members and other persons 

using its facilities. 

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 

The foregoing proposed rule change is 

effective upon filing pursuant to Section 

19(b)(3)(A)(ii) of the Act 6 and Rule 19b– 

4(f)(2) thereunder.7

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

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 rulecomments@sec.gov. Please include File 

Number SR–NYSEAmex–2009–08 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–NYSEAmex-2009–08. 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 inspection and copying in 

the Commission’s Public Reference 

Room, on official business days between 

the hours of 10 a.m. and 3 p.m. Copies 

of such filing will also 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– 

NYSEAmex–2009–08 and should be 

submitted on or before May 5, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–8418 Filed 4–13–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59717; File No. SR–FINRA– 

2009–021] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Codify the Extended 

Hours Trading Risk Disclosure 

Obligation as New FINRA Rule 2265 

April 7, 2009. 

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 March 27, 

2009, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) (f/k/a 

National Association of Securities 

Dealers, Inc. (‘‘NASD’’)) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II [sic], which Items have been prepared 

by FINRA. FINRA has designated the 

proposed rule change as ‘‘constituting a 

stated policy, practice, or interpretation 

with respect to the meaning, 

administration, or enforcement of an 

existing rule’’ under Section 

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

4(f)(1) thereunder,4 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 

FINRA Rule 2265 (Extended Hours 

Trading Risk Disclosure) to codify the 

existing obligation to disclose to 

customers the risks of extended hours 

trading. 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 

On January 10, 2000, FINRA, then 

NASD, filed with the SEC a Notice to 

Members reminding members of their 

obligation under just and equitable 

principles of trade 5 and the advertising 

rule 6 to disclose to all customers the 

material risks of extended hours trading 

(i.e., trading outside regular trading 

17244 Federal Register / Vol. 74, No. 70 / Tuesday, April 14, 2009 / Notices 

7See Securities Exchange Act Release No. 42363 

(January 28, 2000), 65 FR 5715 (February 4, 2000) 

(Notice of Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to a Notice to 

Members on Extended Hours Trading) (SR–NASD 

00–01) (‘‘NTM 00–07’’). 

8A trade-through occurs when one trading center 

executes an order at a price that is inferior to the 

price of a protected quotation. See 17 CFR 

242.600(77). 

9 15 U.S.C. 78o–3(b)(6). 

10 15 U.S.C. 78s(b)(3)(A). 

11 17 CFR 240.19b–4(f)(x). 

hours of 9:30 a.m. to 4 p.m. Eastern 

Standard Time).7 In its filing with the 

Commission, FINRA noted that, while 

the growth of extended hours trading 

provides customers with greater 

opportunities to trade securities and 

manage their portfolios, it also involves 

material risks that are specific to 

extended hours trading. 

NTM 00–07 provided a model 

extended hours risk disclosure 

statement for retail and institutional 

customers that addressed six primary 

trading risks: (1) Lower liquidity; (2) 

higher volatility; (3) changing prices; (4) 

unlinked markets; (5) an exaggerated 

effect from news announcements; and 

(6) wider spreads. This disclosure 

statement defined certain essential 

terminology (e.g., ‘‘liquidity,’’ 

‘‘volatility,’’ and ‘‘spread’’) and 

explained the risks that are present 

during extended hours trading, 

specifically: 

• Risk of Lower Liquidity. Liquidity 

refers to the ability of market 

participants to buy and sell securities. 

Generally, the more orders that are 

available in a market, the greater the 

liquidity. Liquidity is important because 

with greater liquidity it is easier for 

investors to buy or sell securities, and 

as a result, investors are more likely to 

pay or receive a competitive price for 

securities purchased or sold. There may 

be lower liquidity in extended hours 

trading as compared to regular market 

hours. As a result, your order may only 

be partially executed, or not at all. 

• Risk of Higher Volatility. Volatility 

refers to the changes in price that 

securities undergo when trading. 

Generally, the higher the volatility of a 

security, the greater its price swings. 

There may be greater volatility in 

extended hours trading than in regular 

market hours. As a result, your order 

may only be partially executed, or not 

at all, or you may receive an inferior 

price in extended hours trading than 

you would during regular market hours. 

• Risk of Changing Prices. The prices 

of securities traded in extended hours 

trading may not reflect the prices either 

at the end of regular market hours, or 

upon the opening the next morning. As 

a result, you may receive an inferior 

price in extended hours trading than 

you would during regular market hours. 

• Risk of Unlinked Markets. 

Depending on the extended hours 

trading system or the time of day, the 

prices displayed on a particular 

extended hours trading system may not 

reflect the prices in other concurrently 

operating extended hours trading 

systems dealing in the same securities. 

Accordingly, you may receive an 

inferior price in one extended hours 

trading system than you would in 

another extended hours trading system. 

• Risk of News Announcements. 

Normally, issuers make news 

announcements that may affect the price 

of their securities after regular market 

hours. Similarly, important financial 

information is frequently announced 

outside of regular market hours. In 

extended hours trading, these 

announcements may occur during 

trading, and if combined with lower 

liquidity and higher volatility, may 

cause an exaggerated and unsustainable 

effect on the price of a security. 

• Risk of Wider Spreads. The spread 

refers to the difference in price between 

what you can buy a security for and 

what you can sell it for. Lower liquidity 

and higher volatility in extended hours 

trading may result in wider than normal 

spreads for a particular security. 

In addition, FINRA notes that certain 

regulatory protections are not in effect 

after the end of ‘‘regular trading hours’’ 

on any trading day. For example, the 

SEC’s Regulation NMS’s ‘‘tradethrough’’ rules do not apply to 

executions after 4 p.m. EST.8

FINRA is proposing to transfer this 

existing disclosure obligation into new 

FINRA Rule 2265 (Extended Hours 

Trading Risk Disclosure) for 

administrative and ease of reference 

purposes. As is currently the case, 

members would retain a measure of 

flexibility in the wording of the risk 

disclosure (so long as, at a minimum, 

the above six areas are addressed). In 

addition to the above specific 

disclosures, members must include any 

additional disclosures as are relevant 

and appropriate to the member’s 

business consistent with their 

obligations under just and equitable 

principles of trade. 

As noted in Item 2 of this filing, 

FINRA has filed the proposed rule 

change for immediate effectiveness. The 

effective date and the implementation 

date will be the date of filing, March 27, 

2009. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,9 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 continues to believe that 

members that permit customers to 

engage in extended hours trading have 

an obligation to disclose to such 

customers the risks specific to extended 

hours trading. Similarly, members that 

advertise the opportunities and benefits 

of extended hours trading must also 

disclose the material risks. FINRA 

believes that this disclosure requirement 

is an important element in protecting 

investors and informing investors of the 

risks specific to extended hours trading. 

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 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 10 and paragraph (f)(1) of Rule 

19b–4 thereunder.11 At any time within 

60 days of the filing of the proposed rule 

change, the Commission may summarily 

abrogate 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 rulecomments@sec.gov. Please include File 

Number SR–FINRA–2009–021 on the 

subject line. 

Federal Register / Vol. 74, No. 70 / Tuesday, April 14, 2009 / Notices 17245 

12 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. 50100 

(July 27, 2004), 69 FR 44612 [sic] (August 3, 2004) 

(SR–Phlx–2003–59). 

4The Exchange acknowledges that the proposed 

Options Order Protection and Locked/Crossed 

Market Plan may necessitate modifications. 

5Phlx XL and Phlx XL II participants are 

specialists, Streaming Quote Traders (‘‘SQTs’’) and 

Remote Streaming Quote Traders (‘‘RSQTs’’), as 

defined in Phlx Rule 1014(b), assigned to an option. 

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–2009–021. 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 inspection and copying 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 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 available publicly. All 

submissions should refer to File 

Number SR–FINRA–2009–021 and 

should be submitted on or before May 

5, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–8420 Filed 4–13–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Release No. 34–59721; File No. SR–Phlx– 

2009–32 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX, Inc.; Notice of 

Filing of Proposed Rule Change 

Relating to the Exchange’s Enhanced 

Electronic Trading Platform for 

Options, Phlx XL II 

April 7, 2009. 

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 3, 

2009, NASDAQ OMX PHLX, Inc. 

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

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘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 implement 

several enhancements to its electronic 

options trading system, Phlx XL. The 

enhanced system will be known as Phlx 

XL II and will reflect enhancements to 

the opening, linkage and routing, 

quoting, and order management 

processes. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http:// 

nasdaqomxphlx.cchwallstreet.com/ 

NASDAQOMXPHLX/Filings/, at the 

principal office of the Exchange, 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 implement several 

enhancements to the Phlx electronic 

options trading platform, Phlx XL.3 The 

system that includes these 

enhancements will be referred to as 

Phlx XL II. These enhancements should 

improve the execution quality for its 

Phlx users by improving a number of 

processes, including the opening 

process, the order handling process and 

the execution of orders process. The 

changes to the opening process should 

provide better executions to users, more 

consistent prices on executions and a 

smoother transition from the opening to 

the regular trading day. The changes to 

the order handling process will improve 

routing to liquidity available at other 

exchanges while preventing non-exempt 

trade-throughs of other markets, and 

will provide users with increased 

flexibility and control in how their 

orders are handled. Execution of order 

processing will become more consistent, 

with greater continuity in prices as a 

result of these changes, because several 

of the changes are intended to introduce 

a price check to limit executions at far 

away prices (which are known as 

outliers). The Exchange believes that 

these changes benefit investors and 

users through better and more 

consistent system behavior and 

resulting prices. These modifications 

and enhancements are outlined below.4

New Opening Process 

The Exchange proposes to improve its 

opening process for options in several 

ways. Currently, Exchange Rule 1017 

provides that the system will open an 

option series for trading once certain 

conditions have been met. Specifically, 

Rule 1017(a) currently states that the 

system will automatically open a series 

in equity options when a quote or trade 

has been disseminated by the market for 

the underlying security, and there is a 

specialist quote or a defined number of 

Phlx XL participants 5 quoting after a 

certain time period has elapsed. 

Provided there is no order imbalance,