Federal Register / Vol. 74, No. 78 / Friday, April 24, 2009 / Notices 18777 

28 15 U.S.C. 78k–1(a)(1)(C)(iii). 

29 15 U.S.C. 78s(b)(2). 

30See Securities Exchange Act Release No. 58956 

(November 14, 2008), 73 FR 71074 (November 24, 

2008) (SR–NYSEArca–2008–124) (approving listing 

and trading of shares of the iShares Silver Trust). 

See also Securities Exchange Act Release No. 53521 

(March 20, 2006); 71 FR 14967 (March 24, 2006) 

(SR–Amex-2005–072) (approving listing and trading 

of shares of the iShares Silver Trust on the 

American Stock Exchange LLC). 

31 15 U.S.C. 78s(b)(2). 

32 17 CFR 200.30–3(a)(12). 

commodity-based product should 

enhance competition among market 

participants and thereby benefit 

investors and the marketplace. 

The Commission believes that the 

proposal to list and trade the Shares on 

the Exchange is consistent with Section 

11A(a)(1)(C)(iii) of the Act,28 which sets 

forth Congress’s finding that it is in the 

public interest and appropriate for the 

protection of investors and the 

maintenance of fair and orderly markets 

to assure the availability to brokers, 

dealers, and investors of information 

with respect to quotations for and 

transactions in securities. The Exchange 

will make available, through the 

facilities of the CTA, the last sale price 

information for the Shares. In addition, 

the Exchange will disseminate each day 

through the facilities of the CTA the 

number of Shares outstanding and the 

ITV on a per-Share basis at least every 

15 seconds from 9:30 a.m. to 4 p.m. ET. 

The Web site for the Trust, which will 

be publicly accessible, contains 

information related to the NAV, 

including the Bid-Asked Price, the 

Creation Basket Deposit, calculation 

information and data related to the 

premium or discount of the Bid-Asked 

Price against the NAV, the Prospectus, 

and other applicable quantitative 

information, including trading volume 

data, NAV, and closing prices. Shortly 

after 4 p.m. ET each business day, the 

Trust will disseminate the NAV for the 

Shares, and the Creation Basket Deposit. 

Information on silver prices and markets 

is available on public Web sites and 

through professional and subscription 

services, and investors may obtain on a 

24-hour basis silver pricing information 

based on the spot price of an ounce of 

silver from various financial 

information service providers. Complete 

real-time data for silver futures contracts 

and options prices traded on the 

COMEX is available by subscription 

from information services such as 

Reuters or Bloomberg, and information 

on silver is available from published or 

other public sources. NYMEX also 

provides delayed futures and options 

information free of charge. 

Furthermore, the Commission 

believes that the proposal to list and 

trade the Shares is reasonably designed 

to promote fair disclosure of 

information that may be necessary to 

price the Shares appropriately. The 

Commission notes that the Exchange 

has represented that the Trustee will 

calculate, and the Trust will 

disseminate, the NAV per Share daily, 

and make the NAV available to all 

market participants at the same time. In 

addition, NYSE Arca Equities Rule 

8.201(i) provides that, in connection 

with trading in an underlying physical 

commodity, related commodity futures 

or options on commodity futures, or any 

other related commodity derivative, 

including Commodity-Based Trust 

Shares, an ETP Holder acting as a 

Market Maker (as defined in NYSE Arca 

Equities Rule 1.1(u)) in the Shares is 

restricted from using any material nonpublic information received from any 

person associated with such ETP Holder 

regarding by such person in the 

underlying physical commodity, related 

commodity futures or options on 

commodity futures, or other related 

commodity derivatives. 

The Commission also believes that the 

Exchange’s trading halt rules are 

reasonably designed to prevent trading 

in the Shares when transparency is 

impaired. NYSE Arca Equities Rule 

8.201(e)(2) provides that, when the 

Exchange is the listing market, if the 

value of the underlying commodity or 

ITV is no longer calculated or available 

on at least a 15-second delayed basis, 

the Exchange would consider 

suspending trading in the Shares. The 

Exchange has further represented that 

trading on the Exchange in the Shares 

may be halted because of market 

conditions or for reasons that, in the 

view of the Exchange, make trading in 

the Shares inadvisable. These may 

include: (1) The extent to which 

conditions in the underlying silver 

market have caused disruptions and/or 

lack of trading; or (2) whether other 

unusual conditions or circumstances 

detrimental to the maintenance of a fair 

and orderly market are present. In 

addition, trading in Shares will be 

subject to trading halts caused by 

extraordinary market volatility pursuant 

to the Exchange’s ‘‘circuit breaker’’ rule. 

NYSE Arca Equities Rule 8.201(e)(2) 

also provides that the Exchange may 

seek to delist the Shares in the event the 

value of the underlying silver or the ITV 

is no longer calculated or available as 

required. 

The Commission further believes that 

the trading rules and procedures to 

which the Shares will be subject 

pursuant to this proposal are consistent 

with the Act. The Exchange has 

represented that any securities listed 

pursuant to this proposal will be 

deemed equity securities, and subject to 

existing Exchange rules governing the 

trading of equity securities. 

In support of this proposal, the 

Exchange has made representations, 

including: 

(1) The Exchange’s surveillance 

procedures are adequate to deter and 

detect violations of Exchange rules and 

applicable federal securities laws. 

(2) The Exchange will distribute an 

Information Bulletin, the contents of 

which are more fully described above, 

to ETP Holders in connection with the 

trading of the Shares. 

This approval order is conditioned on 

the Exchange’s representations. 

The Commission finds good cause, 

pursuant to Section 19(b)(2) of the 

Act,29 for approving the proposed rule 

change prior to the 30th day after the 

date of publication of notice in the 

Federal Register. The Exchange’s 

proposal to list and trade the Shares 

does not present any novel or significant 

regulatory issues. Previously, the 

Commission approved a proposal by the 

Exchange to list and trade shares of 

another trust that holds silver bullion 

pursuant to NYSE Arca Equities Rule 

8.201.30

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,31 that the 

proposed rule change (SR–NYSEArca– 

2009–28) be, and it hereby is, approved 

on an accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.32

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–9385 Filed 4–23–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59788; File No. SR–FINRA– 

2007–024] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change and 

Amendment No. 1 Thereto Relating to 

Amendments Involving Best Execution 

and Interpositioning 

April 17, 2009. 

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

Securities Exchange Act of 1934 

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18778 Federal Register / Vol. 74, No. 78 / Friday, April 24, 2009 / Notices 

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

2 17 CFR 240.19b–4. 

3 In the mid-1980s, as part of extensive 

amendments to NASD rules, several changes to the 

Interpositioning Rule were proposed but never 

adopted. See NASD Notice to Members 89–20 

(February 17, 1989); NASD Notice to Members 86– 

9 (February 7, 1986). One of the proposed changes, 

which is similar to the current proposed rule 

change, would have prohibited interpositioning 

unless a member could demonstrate that the price 

paid or received by the customer was ‘‘better than 

or equal to’’ the prevailing inter-dealer price. One 

commenter to that proposal, the Securities Industry 

Association, which merged with the Bond Market 

Association to form the Securities Industry and 

Financial Markets Association, supported the 

proposal, noting that if a member deems it 

advantageous for legitimate business reasons to buy 

or sell a security from a non-market maker and the 

customer receives a price equal to the inter-dealer 

price, the customer would not be prejudiced. 

4A member’s best execution obligations under 

NASD Rule 2320 require a member to buy or sell 

a security in the best market for the subject security 

‘‘so that the resultant price to the customer is as 

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

notice is hereby given that on November 

27, 2007, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) 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 FINRA. On April 13, 2009, 

FINRA filed Amendment No. 1 to the 

proposed rule change. The Commission 

is publishing this notice to solicit 

comments on the proposed rule change, 

as amended, from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to amend NASD 

Rule 2320 to update members’ best 

execution obligations involving 

interpositioning and to amend NASD 

Rule 3110(b), NASD IM–2320, and 

FINRA Rule 6635 to reflect the 

redesignation of certain paragraphs in 

NASD Rule 2320. 

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 

NASD Rule 2320(b) (the 

‘‘Interpositioning Rule’’) requires that, 

when interposing a third party between 

a member and the best available market 

for a security, the member must show 

that the total cost or proceeds of the 

transaction were better than the 

prevailing inter-dealer market. 

Accordingly, it is a violation of the 

Interpositioning Rule if a member 

interposes a third party and the total 

cost of the transaction is equal to or 

greater than that of the prevailing interdealer market or the total proceeds of 

the transaction were equal to or less 

than that of the prevailing inter-dealer 

market. 

Although unclear from the legislative 

history of the Interpositioning Rule, it 

appears that the intent of requiring a 

‘‘better than’’ standard, rather than an 

‘‘equal to’’ standard, was to deter 

members from interposing a third party 

in transactions that should be sent 

directly to a market maker.3 Since the 

adoption of the Interpositioning Rule in 

1968, there have been substantial 

changes to the ways in which markets 

function, including technological 

advances, increased market 

transparency in the equities markets, 

and the development of electronic 

communication networks and order 

routing services. These changes enable 

firms, under certain circumstances, to 

use intermediaries and third parties to 

improve the handling of orders with no 

additional cost to the customer. Firms 

are now frequently able to send an order 

to a third party with minimal or no 

delay in the execution of the customer’s 

order and with no additional cost to the 

customer. In addition, there are 

occasions when the use of a third party 

may be necessary to effectuate the 

execution of an order. For example, a 

firm may need to involve a third party 

if it receives an order for a foreign 

security that may not trade in the 

United States and the firm lacks the 

ability to execute the order without 

involving another broker-dealer. The 

language of the Interpositioning Rule 

could be read to include such 

circumstances, even if the customer 

incurs no additional cost or the cost is 

necessary to effectuate the trade. FINRA 

believes that the current language of the 

Interpositioning Rule does not reflect 

the reality of recent technological 

advances in order handling and that the 

rule could be read to prohibit conduct 

that does not adversely affect the 

customer and, in some cases, benefits 

the customer. 

The proposed rule change is intended 

to address the potential overbreadth of 

the current Interpositioning Rule while 

making clear that interpositioning third 

parties in a way that results in customer 

harm is still prohibited. The proposed 

rule change would replace the current 

Interpositioning Rule with a more 

general statement that the factors 

enumerated in Rule 2320(a) apply to 

those situations contemplated by the 

Interpositioning Rule (i.e., orders routed 

to third parties between a member and 

the best available market). Rule 2320(a) 

states that members and persons 

associated with a member must use 

reasonable diligence to ascertain the 

best market for a security when 

handling transactions for or with a 

customer or a customer of another 

broker-dealer. Among the factors to be 

considered in determining whether a 

member has used reasonable diligence 

to ascertain the best market for a 

security, are: (1) The character of the 

market for the security, e.g., price, 

volatility, relative liquidity, and 

pressure on available communications; 

(2) the size and type of transaction; (3) 

the number of markets checked; (4) 

accessibility of the quotation; and (5) 

the terms and conditions of the order 

which result in the transaction, as 

communicated to the member and 

persons associated with the member. In 

addition, Rule 2320(a) requires members 

and persons associated with a member 

to buy or sell in the best market ‘‘so that 

the resultant price to the customer is as 

favorable as possible under prevailing 

market conditions.’’ 

Rather than focusing exclusively on 

cost, as the current Interpositioning 

Rule does, the proposed rule change 

would apply the standards in Rule 

2320(a) to the execution of all orders, 

including those involving interposed 

third parties. Thus, although the cost 

(or, as phrased in 2320(a), the resultant 

price) to a customer would remain a 

crucial factor in determining whether a 

member has fulfilled its best execution 

obligations under Rule 2320, 

particularly in the context of retail 

customer order executions, the 

proposed rule change would allow an 

analysis of a variety of factors, based on 

the terms of the customer’s order and 

instructions, rather than focusing solely 

on cost any time a member interposes a 

third party between the member and the 

best available market for a security.4

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Federal Register / Vol. 74, No. 78 / Friday, April 24, 2009 / Notices 18779 

favorable as possible under prevailing market 

conditions.’’ However, other FINRA rules also 

apply when handling customer orders. For 

example, NASD Rule 2440 and FINRA Rule 2010 

prohibit members from charging customers more 

than a fair commission or service charge, taking into 

consideration all relevant circumstances. If a 

member interposes a third party that charges a 

commission or service charge, the member must 

ensure that the total resulting commissions or 

service charges paid by the customer are fair. 

Consequently, unnecessarily interposing a third 

party in a transaction and passing on to a customer 

a fee charged by that third party would violate 

NASD Rule 2440 and FINRA Rule 2010. 

5 15 U.S.C. 78o–3(b)(6). 

6 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

However, interpositioning that is 

unnecessary or violates a member’s 

general best execution obligations— 

either because of unnecessary costs to 

the customer or improperly delayed 

executions—would still be prohibited. 

The effective date of the proposed 

rule change will be the date of 

Commission approval. FINRA will 

announce the approval in a Regulatory 

Notice within 30 days following 

Commission approval. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,5 which 

requires, among other things, that 

FINRA rules must 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 allow for a 

determination of best execution to be 

based on all of the facts and 

circumstances surrounding an order 

rather than a singular focus on one 

aspect of the transaction. 

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 

Within 35 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 self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve 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–FINRA–2007–024 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–FINRA–2007–024. 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 publicly available. All 

submissions should refer to File 

Number SR–FINRA–2007–024 and 

should be submitted on or before May 

15, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.6

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–9374 Filed 4–23–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59784; File No. SR–FINRA– 

2009–019] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change To Adopt 

FINRA Rules 1010 (Electronic Filing 

Requirements for Uniform Forms) and 

2263 (Arbitration Disclosure to 

Associated Persons Signing or 

Acknowledging Form U4) in the 

Consolidated FINRA Rulebook 

April 17, 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 April 7, 

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, II, 

and III below, which Items have been 

prepared by FINRA. 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, subject 

to certain amendments, NASD Rules 

1140 (Electronic Filing Rules) and 3080 

(Disclosure to Associated Persons When 

Signing Form U–4) as FINRA rules in 

the consolidated FINRA rulebook. The 

proposed rule change would renumber 

NASD Rule 1140 as FINRA Rule 1010 

(Electronic Filing Requirements for 

Uniform Forms) and NASD Rule 3080 as 

FINRA Rule 2263 (Arbitration 

Disclosure to Associated Persons 

Signing or Acknowledging Form U4) in 

the consolidated FINRA rulebook. 

mstockstill on PROD1PC66 with NOTICES