Federal Register / Vol. 74, No. 80 / Tuesday, April 28, 2009 / Notices 19249 

6 15 U.S.C. 78q(b)(3)(F). 

7Elimination or modification of the fails-todeliver charge would require FICC to file a 

proposed rule change pursuant to Section 19(b) of 

the Act. 

8 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f). 

9 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). 

4 17 CFR 240.19b–4(f)(6). 

5See Securities Exchange Act Release No. 58903 

(November 5, 2008), 73 FR 67905 (November 17, 

2008) (order approving SR–FINRA–2008–011); and 

Securities Exchange Act Release No. 58903A 

(November 13, 2008), 73 FR 69700 (November 19, 

2008) (correction to order approving SR–FINRA– 

2008–011). SR–FINRA–2008–011 will be 

implemented on August 3, 2009. See FINRA 

Regulatory Notice 09–08 (January 2009). 

introducing the potential to game the 

system due to wider spreads between 

bid and offer prices, resulting in 

allowing someone to take advantage of 

those inadvertently caught in a fail 

situation. 

In response to these concerns, FICC 

noted that FICC’s delivery allocation 

process, a process that matches buy 

obligations to sell obligations and is 

applicable to all members, is necessary 

to ensure that the clearing corporation 

remains flat. Accordingly, FICC 

contends, the fails charge would not 

have any unique impact on the 

commenter’s firm. With regards to the 

concern that the fails charge may result 

in firms shifting their business away 

from FICC in order to avoid a fails 

charge, FICC agrees that applying the 

fails charge as proposed by the rule 

would result in adverse consequences if 

the rest of the industry does not adopt 

it. However, FICC argues, FICC would 

cease applying the charge if the Credit 

and Market Risk Management 

Committee of FICC’s Board of Directors 

determines that industry events or 

practices warrant such a revocation. 

Finally, FICC rejected the commenters 

assertions regarding the proposed rule 

change’s effect on market liquidity and 

providing new opportunities for firms to 

‘‘game’’ the system as ‘‘highly 

speculative.’’ Even if these adverse 

effects developed, FICC argues that it 

would be able to respond by eliminating 

the fails charge or taking other 

appropriate action. 

IV. Discussion 

Section 17A(b)(3)(F) of the Act 

requires, among other things, that the 

rules of a clearing agency be designed to 

promote the prompt and accurate 

clearance and settlement of securities 

transactions, assure the safeguarding of 

securities and funds which are in the 

custody or control of the clearing agency 

or for which it is responsible, to foster 

cooperation and coordination with 

persons engaged in the clearance and 

settlement of securities transactions, to 

remove impediments to and perfect the 

mechanism of a national system for the 

prompt and accurate clearance and 

settlement of securities transactions, 

and, in general, to protect investors and 

the public interest.6 The Commission 

believes the rule change is consistent 

with Act because the fails-to-deliver 

charge should discourage firms from 

creating and maintaining persistent 

fails-to-deliver in treasury securities, 

which if permitted to subsist, may 

adversely affect FICC’s ability to 

safeguard securities or funds in FICC’s 

control or for which it is responsible 

and to promptly and accurately clear 

and settle securities transactions. In the 

event that the rule change does not have 

the intended affect or produces other 

undesirable consequences, FICC has the 

ability to eliminate the rule or take other 

appropriate action to address any 

ensuing problems.7

Accordingly, for the reasons stated 

above the Commission believes that the 

rule change is consistent with FICC’s 

obligation under Section 17A of the Act. 

V. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and in 

particular with the requirements of 

Section 17A of the Act and the rules and 

regulations thereunder.8

It is therefore ordered, pursuant to 

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

proposed rule change (File No. SR– 

FICC–2008–03) be and hereby is 

approved. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–9557 Filed 4–27–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59805; File No. SR–FINRA– 

2009–027] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Make NonSubstantive, Technical Changes to 

FINRA Trade Reporting Rules Upon 

Implementation of SR–FINRA–2008– 

011 

April 21, 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 16, 

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. FINRA has 

designated the proposed rule change as 

constituting a ‘‘non-controversial’’ rule 

change under Section 19(b)(3)(A) of the 

Act3 and paragraph (f)(6) thereunder,4

which renders the proposal effective 

upon receipt of this filing by 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 (1) replace 

references to ‘‘MMID’’ or ‘‘OEID’’ in 

Rules 6282, 7130, 7230A, 7230B and 

7330 that will be obsolete upon the 

implementation of proposed rule change 

SR–FINRA–2008–011; and (2) update 

rule cross-references in Rules 6380B and 

7230B, as amended pursuant to SR– 

FINRA–2008–011.5

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 November 5, 2008, the SEC 

approved amendments to FINRA trade 


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19250 Federal Register / Vol. 74, No. 80 / Tuesday, April 28, 2009 / Notices 

6OTC equity transactions include transactions in 

NMS stocks effected otherwise than on an 

exchange, which are reported through the 

Alternative Display Facility (‘‘ADF’’) or a Trade 

Reporting Facility (‘‘TRF’’), and transactions in OTC 

Equity Securities, as defined in Rule 6420, which 

are reported through the OTC Reporting Facility 

(‘‘ORF’’). The ADF, TRFs and ORF are collectively 

referred to herein as the ‘‘FINRA Facilities.’’ 

7FINRA also is proposing technical amendments 

to correct the cross-references in paragraphs (c) and 

(d) of Rule 6282 that incorrectly refer to numbered 

subparagraphs of (e) and (f), respectively; these 

cross-references should refer to numbered 

subparagraphs of (c) and (d), respectively. 

8See Securities Exchange Act Release No. 59175 

(December 30, 2008), 74 FR 840 (January 8, 2009) 

(notice of filing and immediate effectiveness of SR– 

FINRA–2008–066). SR–FINRA–2008–066 was filed 

for immediate effectiveness with an operative date 

of January 1, 2009. 

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)(6). 

reporting rules applicable to over-thecounter (‘‘OTC’’) equity transactions 6 to 

(1) replace the current market makerbased trade reporting structure with an 

‘‘executing party’’ structure; and (2) 

require members with the trade 

reporting obligation under FINRA rules 

that are acting in a riskless principal or 

agency capacity on behalf of one or 

more other member firms to submit nontape report(s) to FINRA, as necessary, to 

identify such other member firm(s) as a 

party to the trade. 

This proposed rule change would 

make technical, non-substantive 

changes to certain FINRA rules upon the 

implementation of SR–FINRA–2008– 

011. Specifically, FINRA is proposing to 

delete the references to ‘‘MMID’’ and 

‘‘OEID’’ in Rules 6282(c) and (d), 

7130(b), 7230A(d), 7230B(d) and 

7330(d). When the market maker-based 

trade reporting structure is replaced 

with the executing party structure, 

references to ‘‘MMID’’ (which 

corresponds to the ‘‘market maker’’ side) 

and ‘‘OEID’’ (which corresponds to the 

‘‘order entry’’ side) will be obsolete, and 

they will be deleted from the revised 

system technical specifications for the 

FINRA Facilities. As such, FINRA is 

proposing to amend the rules to refer to 

the Reporting Member (denoted as the 

‘‘Executing Party’’ or ‘‘EPID’’) and the 

Non-Reporting Member or Party, as 

applicable (denoted as the ‘‘Contra 

Party’’ or ‘‘CPID’’). 

In this regard, FINRA also is 

proposing to amend Rule 6282 to (1) 

replace references in paragraphs (c) and 

(d) to ‘‘Non-Reporting Member’’ with 

‘‘Non-Reporting Member (or other 

contra party),’’ where applicable, to 

clarify that the contra party to a trade 

may not always be a FINRA member, 

and (2) replace references in paragraph 

(c) to ‘‘Reporting FINRA Member’’ with 

‘‘Reporting Member’’ to maintain 

consistency in the terminology used in 

the rule.7

In addition, on December 22, 2008, 

FINRA filed proposed rule change SR– 

FINRA–2008–066 to reflect the closing 

of the FINRA/NSX TRF. As part of that 

proposed rule change, FINRA proposed 

to renumber the rules relating to the 

FINRA/NYSE TRF, and Rules 6380C 

and 7230C became Rules 6380B and 

7230B, respectively.8 In this filing, 

FINRA is proposing to update the crossreferences in Rules 6380B(d)(4) and 

7230B(c), as amended pursuant to SR– 

FINRA–2008–011, to reflect the 

renumbering of the pertinent rules. 

FINRA has filed the proposed rule 

change for immediate effectiveness. The 

proposed rule change will be operative 

on August 3, 2009, the date on which 

SR–FINRA–2008–011 will be 

implemented. 

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 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 the 

proposed rule change will provide 

greater clarity to members and the 

public regarding FINRA’s trade 

reporting rules. 

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, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 10 and Rule 19b– 

4(f)(6) 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–2009–027 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–2009–027. 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 


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Federal Register / Vol. 74, No. 80 / Tuesday, April 28, 2009 / Notices 19251 

12 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). 

4Securities Exchange Act Release No. 58721 

(October 2, 2008), 73 FR 59696 (October 9, 2008) 

(SR–NASDAQ–2008–079). 

submissions should refer to File 

Number SR–FINRA–2009–027 and 

should be submitted on or before May 

19, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–9559 Filed 4–27–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59807; File No. SR– 

NASDAQ–2009–036] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Order Routing 

April 21, 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 17, 

2009, The NASDAQ Stock Market LLC 

(‘‘NASDAQ’’) 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 NASDAQ. NASDAQ 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 

NASDAQ proposes to modify Rule 

4758, Order Routing, to provide market 

participants with the option of entering 

orders that do not check the Nasdaq 

Market Center book prior to routing. 

NASDAQ proposes to implement the 

change with respect to Rule 

4758(a)(1)(A)(i) on or about May 1, 

2009, and will announce the exact date 

of implementation in a NASDAQ Equity 

Trader Alert. NASDAQ proposes to 

implement the change with respect to 

Rules 4758(a)(1)(A)(ii) and (iii) on a date 

in May or June 2009, to be announced 

in a NASDAQ Equity Trader Alert. 

The text of the proposed rule change 

is below. Proposed new language is 

italicized and proposed deletions are in 

brackets. 

4758. Order Routing 

(a) Order Routing Process. 

(1) The Order Routing Process shall be 

available to Participants from 7:00 a.m. 

until 8:00 p.m. Eastern Time, and shall 

route orders as described below: All 

routing of orders shall comply with Rule 

611 of Regulation NMS under the 

Exchange Act. 

(A) The System provides three routing 

options. Of these three, DOT is only 

available for orders ultimately sought to 

be directed to either the New York Stock 

Exchange (‘‘NYSE’’) or [the American 

Stock Exchange (‘‘AMEX’’)] NYSE 

Amex. The System will consider the 

quotations only of accessible markets. 

The three System routing options are: 

(i) DOT (‘‘DOT’’)—under this option, 

after checking the System for available 

shares if so instructed by the entering 

firm, orders are sent to other available 

market centers for potential execution, 

per entering firm’s instructions, before 

being sent to the destination exchange, 

so long as the price at such market 

centers would not violate the Order 

Protection Rule. Any un-executed 

portion will thereafter be sent to the 

NYSE or [AMEX] NYSE Amex, as 

appropriate, at the order’s original limit 

order price. This option may only be 

used for orders with time-in-force 

parameters of either SDAY, SIOC, 

MDAY, MIOC, GTMC or market-onopen/close. Notwithstanding the 

foregoing, orders designated for 

participation in the NYSE or [AMEX] 

NYSE Amex opening or closing 

processes will not check the System for 

available shares prior to routing. 

(ii) Reactive Electronic Only 

(‘‘STGY’’)—under this option, after 

checking the System for available shares 

if so instructed by the entering firm, 

orders are sent to other available market 

centers for potential execution, per 

entering firm’s instructions. When 

checking the book, the System will seek 

to execute at the price it would send the 

order to a destination market center. If 

shares remain un-executed after routing, 

they are posted on the book. Once on 

the book, should the order subsequently 

be locked or crossed by another 

accessible market center, the System 

shall route the order to the locking or 

crossing market center. With the 

exception of the Minimum Quantity 

order type, all time-in-force parameters 

and order types may be used in 

conjunction with this routing option. 

(iii) Electronic Only Scan (‘‘SCAN’’)— 

under this option, after checking the 

System for available shares if so 

instructed by the entering firm, orders 

are sent to other available market 

centers for potential execution, per 

entering firm’s instructions, in 

compliance with Rule 611 under 

Regulation NMS. When checking the 

book, the System will seek to execute at 

the price it would send the order to a 

destination market center. If shares 

remain un-executed after routing, they 

are posted on the book. Once on the 

book, should the order subsequently be 

locked or crossed by another market 

center, the System will not route the 

order to the locking or crossing market 

center. With the exception of the 

Minimum Quantity order type, all timein-force parameters and order types may 

be used in conjunction with this routing 

option. 

Orders that do not check the System 

for available shares prior to routing may 

not be sent to a facility of an exchange 

that is an affiliate of Nasdaq, except for 

orders that are sent to the NASDAQ 

OMX BX Equities Market. 

(B) No change. 

(b) No change. 

* * * * * 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NASDAQ 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. 

NASDAQ 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 

In SR–NASDAQ–2008–079,4

NASDAQ amended Rule 4758 to 

provide that if an order is routed to the 

New York Stock Exchange (‘‘NYSE’’) or 

NYSE Amex and is designated as 

eligible for posting to the NYSE or 

NYSE Amex book, the order must check 

the NASDAQ book prior to routing. 

Routing of orders eligible to post at 

NYSE or NYSE Amex is conducted 

pursuant to NASDAQ’s DOT routing 

strategy, as described in Rule 


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