25020 Federal Register / Vol. 75, No. 87 / Thursday, May 6, 2010 / Notices 

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). 

5 15 U.S.C. 78s(b)(3)(A). 

6 17 CFR 240.19b–4(f)(2). 

7See Securities Exchange Act Release No. 56007 

(July 3, 2007), 72 FR 37807 (July 11, 2007) (Notice 

of Filing and Immediate Effectiveness of File No. 

SR–NASD–2007–046). SR–NASD–2007–046 

proposed to adopt paragraph (h) of NASD Rule 

6130. Pursuant to SR–FINRA–2008–021, NASD 

Rule 6130 was renumbered as FINRA Rule 7230A. 

See Securities Exchange Act Release No. 58643 

(September 25, 2008), 73 FR 57174 (October 1, 

2008) (Order Approving File No. SR–FINRA–2008– 

021). 

8Trading on a ‘‘net basis’’ means that the brokerdealer’s compensation is implicitly included in the 

execution price disseminated to the tape and 

reported for clearance and settlement to the 

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–NYSEArca–2010–36 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–NYSEArca–2010–36. 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 Web site viewing and 

printing in the Commission’s Public 

Reference Room, 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–NYSEArca–2010–36 and 

should be submitted on or before May 

27, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–10600 Filed 5–5–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61997; File No. SR–FINRA– 

2010–017] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Allow FINRA Members 

To Use the OTC Reporting Facility To 

Transfer Transaction Fees Charged by 

One Member to Another Member 

April 28, 2010. 

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 12, 

2010, the Financial Industry Regulatory 

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

designated the proposed rule change as 

constituting a ‘‘non-controversial’’ rule 

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

Act 3 and Rule 19b–4(f)(6) thereunder,4

which renders the proposal effective 

upon receipt of this filing by the 

Commission. Additionally, FINRA has 

designated the proposed rule change as 

‘‘establishing or changing a due, fee or 

other charge’’ under Section 19(b)(3)(A) 

of the Act 5 and Rule 19b–4(f)(2) 

thereunder,6 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) adopt 

FINRA Rule 7330(i) to permit FINRA 

members to use the OTC Reporting 

Facility (the ‘‘ORF’’) to transfer 

transaction fees charged by one member 

to another member on trades reported to 

the ORF; and (2) amend FINRA Rule 

7710 to establish the fee to be charged 

by the ORF for use of the transaction fee 

transfer service. 

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, on the 

Commission’s Web site at http:// 

www.sec.gov, 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 

Background: 

Rule 7230A(h) permits FINRA 

members to agree in advance to transfer 

a transaction fee charged by one 

member to another member on a 

transaction in NMS stocks effected 

otherwise than on an exchange through 

the submission of a clearing report to 

the FINRA/Nasdaq Trade Reporting 

Facility (‘‘FINRA/Nasdaq TRF’’). Prior to 

the adoption of Rule 7230A(h) in 2007,7

there was no mechanism for members to 

charge each other commissions or other 

explicit transaction fees through the 

FINRA trade reporting and clearance 

submission process. Generally, members 

wanting to charge other members an 

explicit transaction fee either billed and 

collected those fees directly from the 

other member outside the transaction 

reporting and clearing process or traded 

on a ‘‘net’’ basis.8 Rule 7230A(h) 

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Federal Register / Vol. 75, No. 87 / Thursday, May 6, 2010 / Notices 25021 

National Securities Clearing Corporation (‘‘NSCC’’). 

For example, broker-dealer 1 (B/D 1) purchases a 

security at $10 and sells the security to brokerdealer 2 (B/D 2) ‘‘net’’ at a price of $10.001. Because 

$10.001 is the reported trade price, the transaction 

fee is included as part of the trade and is transferred 

as part of the clearance and settlement process. 

9 If the parties were trading on a net basis with 

the fee incorporated in the trade price, the 

transaction at a price of $10.001 would be reported 

to the tape and also submitted to NSCC. 

10FINRA also is proposing to adopt paragraph (h) 

of Rule 6622, which would provide expressly that 

members may enter into ‘‘give up’’ arrangements 

whereby one member reports to the ORF on behalf 

of another member, provided that both members 

have executed and submitted to the ORF the 

appropriate documentation. The proposed 

provision is identical to the current rules relating 

to the FINRA/Nasdaq Trade Reporting Facility and 

the FINRA/NYSE Trade Reporting Facility and 

codifies current practice and guidance with respect 

to reporting to the FINRA Facilities. See Rules 

6380A(h) and 6380B(g); Member Alert: Notice to All 

TRF, ADF and Other NASD Facility Participants 

Regarding AGU and QSR Relationships (January 25, 

2007). 

11 15 U.S.C. 78o–3(b)(6). 

12 15 U.S.C. 78o–3(b)(5). 

provides members with another 

alternative by permitting the transfer of 

a transaction fee as part of a clearing 

report submitted to the FINRA/Nasdaq 

TRF. 

Proposed Amendments Relating to 

Transfer of Transaction Fees in Clearing 

Reports Submitted to the ORF: 

The proposed rule change would 

adopt a provision identical to Rule 

7230A(h) for purposes of transferring 

transaction fees between members as 

part of a clearing report submitted to the 

ORF. Specifically, pursuant to proposed 

Rule 7330(i), members would be 

required to provide in reports submitted 

to the ORF, in addition to all other 

information required to be submitted by 

any other rule, a total per share or 

contract price amount, inclusive of the 

transaction fee. As a result, members 

would submit two price amounts as part 

of their report to the ORF: one price 

including the transaction fee, which 

would be submitted by the ORF to 

NSCC for clearance and settlement; and 

one price exclusive of the transaction 

fee, which would be publicly 

disseminated. For example, if B/D 1 

purchases from B/D 2 at $10.00 and B/ 

D 1 and B/D 2 agree to a transaction fee 

of $.001 per share, the trade price that 

would be publicly disseminated would 

be $10.00, while the trade would be 

cleared and settled by NSCC at 

$10.001.9 The parties to the trade would 

know both prices—the price reported 

for public dissemination and the 

clearance/settlement price. 

Proposed Rule 7330(i) provides that 

both members and their respective 

clearing firms, as applicable, must 

execute an agreement, as specified by 

FINRA, permitting the facilitation of the 

transfer of the transaction fee through 

the ORF, as well as any other applicable 

agreement, such as a give up 

agreement.10 Such agreement must be 

executed and submitted to the ORF 

before the members can transfer any 

transaction fee under the proposed rule. 

Among other things, the form of 

agreement specified by FINRA would 

expressly provide that the acceptance 

and processing by the ORF of the 

transaction fee as part of a trade report 

shall not constitute an estoppel as to 

FINRA or bind FINRA in any 

subsequent administrative, civil or 

disciplinary proceeding with respect to 

the transaction fee transferred. In other 

words, processing of a transaction fee by 

the ORF should not be taken to mean 

that FINRA approved that transaction 

fee or its amount or its appropriateness 

under FINRA rules or federal securities 

laws. The mere fact that the transaction 

fee flowed through a FINRA facility will 

not be a defense to any action taken by 

FINRA relating to the fee. The proposed 

rule also provides that the relevant 

agreements are considered member 

records for purposes of NASD Rule 

3110(a) and must be made and 

preserved by both members in 

conformity with applicable FINRA 

rules. 

Furthermore, the proposed rule 

expressly provides that it shall not 

relieve a member from its obligations 

under FINRA rules and federal 

securities laws, including but not 

limited to, NASD Rule 2230 

(Confirmations) and SEA Rule 10b–10. 

To the extent that any transaction fee is 

passed onto the customer, members 

should review their customer 

confirmation obligations to ensure that 

they are disclosing such fees in 

compliance with all applicable rules 

and regulations, as well as other FINRA 

rules, including but not limited to, 

NASD Rules 2320 (Best Execution and 

Interpositioning) and 2440 (Fair Prices 

and Commissions). 

The proposed rule relates solely to 

transaction fees charged by one FINRA 

member to another FINRA member. 

Members would not be able to use the 

ORF to facilitate the transfer of fees for 

transactions with a customer (i.e., 

clients that are not brokers or dealers) or 

a non-member. In addition, the ORF can 

only be used to facilitate the transfer of 

transaction fees. Members would not be 

able to use the ORF to transfer access 

fees or rebates on transactions. 

FINRA also is proposing to amend 

Rule 7330(d) to require that for any 

transaction for which the ORF is used 

to transfer a transaction fee between two 

members, the trade report must comply 

with the requirements of proposed Rule 

7330(i). Thus, while use of the ORF to 

transfer transaction fees between 

members is voluntary, members that opt 

to use this service must comply with the 

requirements of proposed Rule 7330(i), 

as well as all other applicable FINRA 

rules. 

Proposed Fee for Use of Transaction 

Fee Transfer Service: 

In this filing, FINRA also is proposing 

to establish the fee to be charged by the 

ORF for use by members of the 

transaction fee transfer service. Pursuant 

to Rule 7710, the fee will be $0.03 per 

side for each clearing report submitted 

to the ORF to transfer a transaction fee. 

This fee is in addition to any other fee 

applicable to the transaction. The 

amount of this fee is identical to the fee 

charged by the FINRA/Nasdaq TRF 

under Rule 7620A for the same 

transaction fee transfer service. 

FINRA has filed the proposed rule 

change for immediate effectiveness. The 

operative date will be June 1, 2010. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,11 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 by 

automating and improving transaction 

fee transfers between members as a 

value-added service, the proposed rule 

change will enhance market 

transparency. 

Additionally, FINRA believes that the 

proposed rule change is consistent with 

the provisions of Section 15A(b)(5) of 

the Act,12 which requires, among other 

things, that FINRA rules provide for the 

equitable allocation of reasonable dues, 

fees and other charges among members 

and issuers and other persons using any 

facility or system that FINRA operates 

or controls. FINRA believes that the 

proposed fee for the service is 

reasonably allocated among members 

based on their usage of the functionality 

to transfer transaction fees between 

members and is generally consistent 

with other fees charged by the ORF and 

other FINRA trade reporting facilities. 

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 

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25022 Federal Register / Vol. 75, No. 87 / Thursday, May 6, 2010 / Notices 

13 15 U.S.C. 78s(b)(3)(A). 14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires the Exchange to give the 

Commission written notice of the Exchange’s intent 

to file the proposed rule change, along with a brief 

description and the 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 

Exchange has satisfied the pre-filing requirement. 15 15 U.S.C. 78s(b)(3)(A). 16 17 CFR 240.19b–4(f)(2). 17 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. 61876 

(April 8, 2010), 75 FR 19436 (April 14, 2010) (SR– 

NASDAQ–2010–025). 

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. 

I. 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 13 and Rule 19b– 

4(f)(6) thereunder.14 Additionally, the 

foregoing rule change has become 

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

of the Act 15 and paragraph (f)(2) of Rule 

19b–4 thereunder.16

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. 

II. 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–2010–017 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–2010–017. 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 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 

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–2010–017 and 

should be submitted on or before May 

27, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–10594 Filed 5–5–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–61994; File No. SR–Phlx2010–58] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NASDAQ 

OMX PHLX, Inc. To Amend the ByLaws of The NASDAQ OMX Group, Inc. 

April 27, 2010. 

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 9, 

2010, 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 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 file a 

proposed rule change relating to the ByLaws of its parent corporation, The 

NASDAQ OMX Group, Inc. (‘‘NASDAQ 

OMX’’). The text of the proposed rule 

change is available on the Exchange’s 

Web site 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 

NASDAQ OMX has proposed making 

certain amendments to its By-Laws to 

make improvements in its governance. 

In SR–NASDAQ–2010–025, The 

NASDAQ Stock Market LLC (‘‘NASDAQ 

Exchange’’) sought Commission 

approval to adopt these By-Laws 

changes as part of the rules of NASDAQ 

Exchange, and the Commission granted 

approval to these changes in an order 

dated April 8, 2010.3 The Exchange is 

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