28080 Federal Register / Vol. 75, No. 96 / Wednesday, May 19, 2010 / Notices 

24The Commission also notes that the addition to 

or deletion from the Certification of any federal 

securities laws, rules, and regulations for which 

FINRA would bear responsibility under the Plan for 

examining, and enforcing compliance by, Dual 

Members, also would constitute an amendment to 

the Plan. 

25See paragraph 12 of the proposed 17d–2 Plan. 

26The Commission notes that paragraph 12 of the 

Plan reflects the fact that FINRA’s responsibilities 

under the Plan will continue in effect until the 

Commission approves any termination of the Plan. 

27 17 CFR 200.30–3(a)(34). 

1 15 U.S.C. 78q(d). 

2 17 CFR 240.17d–2. 

3See Securities Exchange Act Release No. 61861 

(April 7, 2010), 75 FR 18920. 

4 15 U.S.C. 78s(g)(1). 

5 15 U.S.C. 78q(d) and 15 U.S.C. 78s(g)(2), 

respectively. 

6 15 U.S.C. 78q(d)(1). 

7See Securities Act Amendments of 1975, Report 

of the Senate Committee on Banking, Housing, and 

Urban Affairs to Accompany S. 249, S. Rep. No. 94– 

75, 94th Cong., 1st Session 32 (1975). 

8 17 CFR 240.17d–1 and 17 CFR 240.17d–2, 

respectively. 

9See Securities Exchange Act Release No. 12352 

(April 20, 1976), 41 FR 18808 (May 7, 1976). 

10See Securities Exchange Act Release No. 12935 

(October 28, 1976), 41 FR 49091 (November 8, 

1976). 

Certification that is substantially similar 

to a FINRA rule; or leave on the 

Certification a EDGA rule that is no 

longer substantially similar to a FINRA 

rule, then such a change would 

constitute an amendment to the Plan, 

which must be filed with the 

Commission pursuant to Rule 17d–2 

under the Act and noticed for public 

comment.24

The Plan also permits EDGA and 

FINRA to terminate the Plan, subject to 

notice.25 The Commission notes, 

however, that while the Plan permits 

the Parties to terminate the Plan, the 

Parties cannot by themselves reallocate 

the regulatory responsibilities set forth 

in the Plan, since Rule 17d–2 under the 

Act requires that any allocation or reallocation of regulatory responsibilities 

be filed with the Commission.26

IV. Conclusion 

This Order gives effect to the Plan 

filed with the Commission in File No. 

4–597. The Parties shall notify all 

members affected by the Plan of their 

rights and obligations under the Plan. 

It is therefore ordered, pursuant to 

Section 17(d) of the Act, that the Plan 

in File No. 4–597, between FINRA and 

EDGA, filed pursuant to Rule 17d–2 

under the Act, is approved and declared 

effective. 

It is therefore ordered that EDGA is 

relieved of those responsibilities 

allocated to FINRA under the Plan in 

File No. 4–597. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–11933 Filed 5–18–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62079; File No. 4–598] 

Program for Allocation of Regulatory 

Responsibilities Pursuant to Rule 17d– 

2; Order Approving and Declaring 

Effective a Plan for the Allocation of 

Regulatory Responsibilities Between 

the Financial Industry Regulatory 

Authority, Inc. and EDGX Exchange, 

Inc. 

May 11, 2010. 

On April 2, 2010, EDGX Exchange, 

Inc. (‘‘EDGX’’) and the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) (together with EDGX, the 

‘‘Parties’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

pursuant to Section 17(d) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 17d–2 thereunder,2 a 

plan for the allocation of regulatory 

responsibilities, dated March 31, 2010 

(‘‘17d–2 Plan’’ or the ‘‘Plan’’). The Plan 

was published for comment on April 13, 

2010.3 The Commission received no 

comments on the Plan. This order 

approves and declares effective the 

Plan. 

I. Introduction 

Section 19(g)(1) of the Act,4 among 

other things, requires every selfregulatory organization (‘‘SRO’’) 

registered as either a national securities 

exchange or national securities 

association to examine for, and enforce 

compliance by, its members and persons 

associated with its members with the 

Act, the rules and regulations 

thereunder, and the SRO’s own rules, 

unless the SRO is relieved of this 

responsibility pursuant to Section 17(d) 

or Section 19(g)(2) of the Act.5 Without 

this relief, the statutory obligation of 

each individual SRO could result in a 

pattern of multiple examinations of 

broker-dealers that maintain 

memberships in more than one SRO 

(‘‘common members’’). Such regulatory 

duplication would add unnecessary 

expenses for common members and 

their SROs. 

Section 17(d)(1) of the Act 6 was 

intended, in part, to eliminate 

unnecessary multiple examinations and 

regulatory duplication.7 With respect to 

a common member, Section 17(d)(1) 

authorizes the Commission, by rule or 

order, to relieve an SRO of the 

responsibility to receive regulatory 

reports, to examine for and enforce 

compliance with applicable statutes, 

rules, and regulations, or to perform 

other specified regulatory functions. 

To implement Section 17(d)(1), the 

Commission adopted two rules: Rule 

17d–1 and Rule 17d–2 under the Act.8

Rule 17d–1 authorizes the Commission 

to name a single SRO as the designated 

examining authority (‘‘DEA’’) to examine 

common members for compliance with 

the financial responsibility 

requirements imposed by the Act, or by 

Commission or SRO rules.9 When an 

SRO has been named as a common 

member’s DEA, all other SROs to which 

the common member belongs are 

relieved of the responsibility to examine 

the firm for compliance with the 

applicable financial responsibility rules. 

On its face, Rule 17d-1 deals only with 

an SRO’s obligations to enforce member 

compliance with financial responsibility 

requirements. Rule 17d–1 does not 

relieve an SRO from its obligation to 

examine a common member for 

compliance with its own rules and 

provisions of the federal securities laws 

governing matters other than financial 

responsibility, including sales practices 

and trading activities and practices. 

To address regulatory duplication in 

these and other areas, the Commission 

adopted Rule 17d–2 under the Act.10

Rule 17d–2 permits SROs to propose 

joint plans for the allocation of 

regulatory responsibilities with respect 

to their common members. Under 

paragraph (c) of Rule 17d–2, the 

Commission may declare such a plan 

effective if, after providing for 

appropriate notice and comment, it 

determines that the plan is necessary or 

appropriate in the public interest and 

for the protection of investors; to foster 

cooperation and coordination among the 

SROs; to remove impediments to, and 

foster the development of, a national 

market system and a national clearance 

and settlement system; and is in 

conformity with the factors set forth in 

Section 17(d) of the Act. Commission 

approval of a plan filed pursuant to Rule 

17d–2 relieves an SRO of those 


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Federal Register / Vol. 75, No. 96 / Wednesday, May 19, 2010 / Notices 28081 

11See Paragraph 1(c) of the proposed 17d–2 Plan 

(defining ‘‘Dual Members’’). 

12See paragraph 1(b) of the proposed 17d–2 Plan. 

See also Securities Exchange Act Release Nos. 

58350 (August 13, 2008), 73 FR 48247 (August 18, 

2008) (File No. 4–566) (notice of filing of proposed 

plan); and 58536 (September 12, 2008) 73 FR 54646 

(September 22, 2008) (File No. 4–566) (order 

approving and declaring effective the plan). The 

Certification identifies several Common Rules that 

may also be addressed in the context of regulating 

insider trading activities pursuant to the proposed 

separate multiparty agreement. 

13See paragraph 6 of the proposed 17d–2 Plan. 

14See paragraph 2 of the proposed 17d–2 Plan. 

15See paragraph 6 of the proposed 17d–2 Plan. 

16 15 U.S.C. 78q(d). 

17 17 CFR 240.17d–2(c). 

18See Securities Exchange Act Release No. 61698 

(March 12, 2010), 75 FR 13151 (March 18, 2010) 

(File No. 10–196). 

19 Id. 

20See paragraph 2 of the proposed 17d–2 Plan. 

21See paragraph 6 of the proposed 17d–2 Plan. 

regulatory responsibilities allocated by 

the plan to another SRO. 

II. Proposed Plan 

The proposed 17d–2 Plan is intended 

to reduce regulatory duplication for 

firms that are common members of both 

EDGX and FINRA. Pursuant to the 

proposed 17d–2 Plan, FINRA would 

assume certain examination and 

enforcement responsibilities for those 

EDGX members that are also members of 

FINRA and the associated persons 

therewith (‘‘Dual Members’’) with 

respect to certain applicable laws, rules, 

and regulations.11

The text of the Plan delineates the 

proposed regulatory responsibilities 

with respect to the Parties. Included in 

the proposed Plan is an exhibit (the 

‘‘EDGX Certification for 17d–2 

Agreement with FINRA,’’ referred to 

herein as the ‘‘Certification’’) that lists 

every EDGX rule, and select federal 

securities laws, rules, and regulations, 

for which FINRA would bear 

responsibility under the Plan for 

overseeing and enforcing with respect to 

Dual Members. 

Specifically, under the 17d–2 Plan, 

FINRA would assume examination and 

enforcement responsibility relating to 

compliance by Dual Members with the 

rules of EDGX that are substantially 

similar to the applicable rules of FINRA, 

as well as any provisions of the federal 

securities laws and the rules and 

regulations thereunder delineated in the 

Certification (‘‘Common Rules’’). 

Common Rules would not include the 

application of any EDGX rule or FINRA 

rule, or any rule or regulation under the 

Act, to the extent that it pertains to 

violations of insider trading activities, 

because such matters are covered by a 

separate multiparty agreement under 

Rule 17d–2.12 In the event that a Dual 

Member is the subject of an 

investigation relating to a transaction on 

EDGX, the plan acknowledges that 

EDGX may, in its discretion, exercise 

concurrent jurisdiction and 

responsibility for such matter.13

Under the Plan, EDGX would retain 

full responsibility for surveillance and 

enforcement with respect to trading 

activities or practices involving EDGX’s 

own marketplace, including, without 

limitation, registration pursuant to its 

applicable rules of associated persons 

(i.e., registration rules that are not 

Common Rules); its duties as a DEA 

pursuant to Rule 17d–1 under the Act; 

and any EDGX rules that are not 

Common Rules, except for EDGX rules 

for any broker-dealer subsidiary of 

Direct Edge Holdings LLC.14 Apparent 

violations of any EDGX rules by any 

broker-dealer subsidiary of Direct Edge 

Holdings LLC. will be processed by, and 

enforcement proceedings in respect 

thereto will be conducted by, FINRA.15

III. Discussion 

The Commission finds that the 

proposed Plan is consistent with the 

factors set forth in Section 17(d) of the 

Act 16 and Rule 17d–2(c) thereunder 17

in that the proposed Plan is necessary 

or appropriate in the public interest and 

for the protection of investors, fosters 

cooperation and coordination among 

SROs, and removes impediments to and 

fosters the development of the national 

market system. In particular, the 

Commission believes that the proposed 

Plan should reduce unnecessary 

regulatory duplication by allocating to 

FINRA certain examination and 

enforcement responsibilities for Dual 

Members that would otherwise be 

performed by both EDGX and FINRA. 

Accordingly, the proposed Plan 

promotes efficiency by reducing costs to 

Dual Members. Furthermore, because 

EDGX and FINRA will coordinate their 

regulatory functions in accordance with 

the Plan, the Plan should promote 

investor protection. 

The Commission notes that when it 

granted the application of EDGX for 

registration as a national securities 

exchange, the Commission conditioned 

the operation of the EDGX exchange on 

the satisfaction of several 

requirements.18 One of those 

requirements was the effectiveness of an 

agreement pursuant to Rule 17d–2 

between FINRA and EDGX that allocates 

to FINRA regulatory responsibility for 

certain specified matters, or, 

alternatively, the demonstration by 

EDGX that it independently has the 

ability to fulfill all of its regulatory 

obligations.19 The proposed 17d–2 Plan 

represents EDGX’s effort to satisfy that 

prerequisite. 

The Commission notes that, under the 

Plan, EDGX and FINRA have allocated 

regulatory responsibility for those EDGX 

rules, set forth on the Certification, that 

are substantially similar to the 

applicable FINRA rules in that 

examination for compliance with such 

provisions and rules would not require 

FINRA to develop one or more new 

examination standards, modules, 

procedures, or criteria in order to 

analyze the application of the rule, or a 

Dual Member’s activity, conduct, or 

output in relation to such rule. In 

addition, under the Plan, FINRA would 

assume regulatory responsibility for 

certain provisions of the federal 

securities laws and the rules and 

regulations thereunder that are set forth 

in the Certification. The Common Rules 

covered by the Plan are specifically 

listed in the Certification, as may be 

amended by the Parties from time to 

time. 

Under the Plan, EDGX would retain 

full responsibility for surveillance and 

enforcement with respect to trading 

activities or practices involving EDGX’s 

own marketplace, including, without 

limitation, registration pursuant to its 

applicable rules of associated persons 

(i.e., registration rules that are not 

Common Rules); its duties as a DEA 

pursuant to Rule 17d–1 under the Act; 

and any EDGX rules that are not 

Common Rules, except for EDGX rules 

for any broker-dealer subsidiary of 

Direct Edge Holdings LLC.20 Apparent 

violations of any EDGX rules by any 

broker-dealer subsidiary of Direct Edge 

Holdings LLC will be processed by, and 

enforcement proceedings in respect 

thereto will be conducted by, FINRA.21

The effect of these provisions is that 

regulatory oversight and enforcement 

responsibilities for any broker-dealer 

subsidiary of Direct Edge Holdings LLC, 

which is the parent company of EDGX, 

will be vested with FINRA. These 

provisions should help avoid any 

potential conflicts of interest that could 

arise if EDGX was primarily responsible 

for regulating its affiliated brokerdealers. 

According to the Plan, EDGX will 

review the Certification, at least 

annually, or more frequently if required 

by changes in either the rules of EDGX 

or FINRA, and, if necessary, submit to 

FINRA an updated list of Common 

Rules to add EDGX rules not included 

on the then-current list of Common 

Rules that are substantially similar to 

FINRA rules; delete EDGX rules 


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28082 Federal Register / Vol. 75, No. 96 / Wednesday, May 19, 2010 / Notices 

22See paragraph 2 of the proposed 17d–2 Plan. 

23See paragraph 3 of the proposed 17d–2 Plan. 

24The Commission also notes that the addition to 

or deletion from the Certification of any federal 

securities laws, rules, and regulations for which 

FINRA would bear responsibility under the Plan for 

examining, and enforcing compliance by, Dual 

Members, also would constitute an amendment to 

the Plan. 

25See paragraph 12 of the proposed 17d–2 Plan. 

26The Commission notes that paragraph 12 of the 

Plan reflects the fact that FINRA’s responsibilities 

under the Plan will continue in effect until the 

Commission approves any termination of the Plan. 

27 17 CFR 200.30–3(a)(34). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(2). 

5Orders designated to use these routing strategies 

check the NASDAQ book for the full size of the 

order prior to routing. The terms and conditions of 

NASDAQ’s routing strategies are described in 

NASDAQ Rule 4758. 

6For DOTI orders that execute in NASDAQ OMX 

BX, NASDAQ will continue to pass through fees 

and rebates associated with order execution on that 

venue. 

included in the then-current list of 

Common Rules that are no longer 

substantially similar to FINRA rules; 

and confirm that the remaining rules on 

the list of Common Rules continue to be 

EDGX rules that are substantially 

similar to FINRA rules.22 FINRA will 

then confirm in writing whether the 

rules listed in any updated list are 

Common Rules as defined in the Plan. 

Under the Plan, EDGX will also provide 

FINRA with a current list of Dual 

Members and shall update the list no 

less frequently than once each quarter.23

The Commission is hereby declaring 

effective a plan that, among other 

things, allocates regulatory 

responsibility to FINRA for the 

oversight and enforcement of all EDGX 

rules that are substantially similar to the 

rules of FINRA for Dual Members of 

EDGX and FINRA. Therefore, 

modifications to the Certification need 

not be filed with the Commission as an 

amendment to the Plan, provided that 

the Parties are only adding to, deleting 

from, or confirming changes to EDGX 

rules in the Certification in conformance 

with the definition of Common Rules 

provided in the Plan. However, should 

the Parties decide to add a EDGX rule 

to the Certification that is not 

substantially similar to a FINRA rule; 

delete a EDGX rule from the 

Certification that is substantially similar 

to a FINRA rule; or leave on the 

Certification a EDGX rule that is no 

longer substantially similar to a FINRA 

rule, then such a change would 

constitute an amendment to the Plan, 

which must be filed with the 

Commission pursuant to Rule 17d–2 

under the Act and noticed for public 

comment.24

The Plan also permits EDGX and 

FINRA to terminate the Plan, subject to 

notice.25 The Commission notes, 

however, that while the Plan permits 

the Parties to terminate the Plan, the 

Parties cannot by themselves reallocate 

the regulatory responsibilities set forth 

in the Plan, since Rule 17d–2 under the 

Act requires that any allocation or reallocation of regulatory responsibilities 

be filed with the Commission.26

IV. Conclusion 

This Order gives effect to the Plan 

filed with the Commission in File No. 

4–598. The Parties shall notify all 

members affected by the Plan of their 

rights and obligations under the Plan. 

It is therefore ordered, pursuant to 

Section 17(d) of the Act, that the Plan 

in File No. 4–598, between FINRA and 

EDGX, filed pursuant to Rule 17d–2 

under the Act, is approved and declared 

effective. 

It is therefore ordered that EDGX is 

relieved of those responsibilities 

allocated to FINRA under the Plan in 

File No. 4–598. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–11934 Filed 5–18–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62081; File No. SR– 

NASDAQ–2010–058] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Modify Fees 

for Members Using the NASDAQ 

Market Center 

May 11, 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 May 3, 

2010, The NASDAQ Stock Market LLC 

(‘‘NASDAQ’’) 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 NASDAQ. Pursuant to 

Section 19(b)(3)(A)(ii) of the Act 3 and 

Rule 19b–4(f)(2) thereunder,4 NASDAQ 

has designated this proposal as 

establishing or changing a due, fee, or 

other charge, which renders the 

proposed rule change effective upon 

filing. 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 the Substance 

of the Proposed Rule Change 

NASDAQ proposes to modify pricing 

for NASDAQ members using the 

NASDAQ Market Center. NASDAQ will 

implement the proposed change on May 

3, 2010. The text of the proposed rule 

change is available at http:// 

nasdaqomx.cchwallstreet.com/, at 

NASDAQ’s principal office, 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, 

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 response to announced execution 

rate changes at the New York Stock 

Exchange (‘‘NYSE’’), NASDAQ is making 

minor modifications to its pricing 

schedule for the routing of orders 

through the NASDAQ Market Center. 

First, NASDAQ is increasing the per 

share credits and fees for members using 

the STGY, SCAN, SKNY, SKIP, or DOTI 

routing strategies to either add liquidity 

or execute at the NYSE.5 The credit for 

orders adding liquidity after routing will 

increase to $0.0013 from $0.0010 per 

share. The fee for other orders will 

increase to $0.0021 from $0.0018 per 

share. For orders using these strategies 

that execute in destinations other than 

the NYSE (or NASDAQ OMX BX, in the 

case of DOTI orders), the fee will remain 

$0.0030 per share executed.6

Second, NASDAQ is modifying the 

fees for members using the TFTY or 

MOPP routing strategies, and directed 

orders that execute in a venue other 

than the NASDAQ Market Center as 


jlentini on DSKJ8SOYB1PROD with NOTICES