29594 Federal Register / Vol. 75, No. 101 / Wednesday, May 26, 2010 / Notices 

10Section 303A.12(b) of the NYSE Listed 

Company Manual requires a listed company’s CEO 

to ‘‘promptly notify the NYSE in writing after any 

executive officer of the listed company becomes 

aware of any non-compliance with any applicable 

provisions of this Section 303A.’’ 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 In an arbitration between members, the panel 

consists of non-public arbitrators, and so the parties 

receive a list of 16 arbitrators from the FINRA nonpublic roster, and a list of eight non-public 

arbitrators from the FINRA non-public chairperson 

roster. See FINRA Rules 13402 and 13403. Each 

separately represented party may strike up to eight 

of the arbitrators from the non-public list and up 

to four of the arbitrators from the non-public 

chairperson list. See FINRA Rule 13404. 

with the corporate governance 

requirements, consistent with Nasdaq’s 

historical interpretation of that 

requirement, and is closely modeled 

after similar rules of another national 

securities exchange.10 Therefore Nasdaq 

believes it does not significantly affect 

the protection of investors or the public 

interest or raise any novel or significant 

regulatory issues. 

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–NASDAQ–2010–060 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–NASDAQ–2010–060. 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 such 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– 

NASDAQ–2010–060 and should be 

submitted on or before June 16, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–12551 Filed 5–25–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62134; File No. SR–FINRA– 

2010–022] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change Relating to 

Amending the Codes of Arbitration 

Procedure to Increase the Number of 

Arbitrators on Lists Generated by the 

Neutral List Selection System 

May 19, 2010. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 194 thereunder,2

notice is hereby given that on April 29, 

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, II, 

and III below, which Items have been 

substantially 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 amend Rules 

12403 and 12404 of the Code of 

Arbitration Procedure for Customer 

Disputes (‘‘Customer Code’’) and Rules 

13403 and 13404 of the Code of 

Arbitration Procedure for Industry 

Disputes (‘‘Industry Code’’) to increase 

the number of arbitrators on each list 

generated by the Neutral List Selection 

System (‘‘NLSS’’). 

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 

The NLSS is a computer system that 

generates, on a random basis, lists of 

arbitrators from FINRA’s rosters of 

arbitrators (i.e., public, non-public, and 

chair rosters) for each arbitration case. 

The parties select their panel through a 

process of striking and ranking the 

arbitrators on the lists. 

Currently, parties are sent lists of 

available arbitrators, along with detailed 

biographical information on each 

arbitrator. In a three-arbitrator case, 

other than one involving a dispute 

among members, the parties receive 

three lists of eight arbitrators each—one 

public, one chair-qualified and one nonpublic. Each party is permitted to strike 

up to four of the eight names on each 

list and ranks the remaining names in 

order of preference. FINRA appoints the 

panel from among the names remaining 

on the lists that the parties return.3

When there are no names remaining 

on a list, or when a mutually acceptable 

arbitrator is unable to serve, a random 


wwoods2 on DSK1DXX6B1PROD with NOTICES_PART 1
Federal Register / Vol. 75, No. 101 / Wednesday, May 26, 2010 / Notices 29595 

4Exchange Act Release No. 55158 (January 24, 

2007), 72 FR 4574 (January 31, 2007) (File No. SR– 

NASD–2003–158). 

5The rationale for the proposed rule change was 

confirmed in a phone conversation between Margo 

Hassan, FINRA Dispute Resolution, and Joanne 

Rutkowski, Division of Trading and Markets, 

Commission, May 18, 2010. 

6FINRA is not proposing to expand the number 

of allowable strikes for each party. 

7Under the rules, each separately represented 

party is entitled to strike four arbitrators from an 

eight arbitrator list. If, for example, a case involves 

a customer, a member and an associated person, 

and each party is separately represented, even with 

10 arbitrators there is a chance that all of the 

arbitrators will be stricken from the list. 

8Again, FINRA is not proposing to expand the 

number of allowable strikes for each party. 

9 15 U.S.C. 78o–3(b)(6). 

selection is made to ‘‘extend the list’’ by 

generating names of additional 

arbitrators to complete the panel. Parties 

may not strike the arbitrators on the 

extended lists, but they may challenge 

an arbitrator for cause (e.g., on the basis 

of conflict of interest). 

Prior to 2007, FINRA permitted 

parties unlimited strikes of proposed 

arbitrators on lists. This often resulted 

in parties collectively striking all of the 

arbitrators on each list generated 

through NLSS. When this occurred, staff 

would use NLSS to ‘‘extend the list’’ by 

generating names of additional 

arbitrators to complete the panel. 

Parties expressed concern about 

extended list arbitrator appointments 

because they could not strike arbitrators 

from an extended list. In response to 

this concern, in 2007, FINRA changed 

the arbitrator appointment process 

through a rule change that limited the 

number of strikes each party may 

exercise to four, in an effort to reduce 

the frequency of extended list 

appointments.4 Under the current rule, 

FINRA permits each party to strike up 

to four arbitrators from each list of eight 

arbitrators generated through NLSS and 

up to eight arbitrators from each list of 

16 arbitrators generated through NLSS. 

The rules limiting strikes have 

significantly reduced extended lists and 

thus increased the percentage of cases in 

which FINRA initially appoints 

arbitrators from the parties’ ranking 

lists. However, after each side exercises 

its strikes, typically only one or two 

persons remain eligible to serve on the 

case. Therefore, when FINRA grants a 

challenge for cause or an arbitrator 

withdraws, FINRA often must appoint 

the replacement arbitrator using an 

extended list. Forum users, including 

both investor and industry parties, 

continue to express concerns about 

extended list appointments.5

As a result of these concerns, FINRA 

is proposing to amend Rule 12403 of the 

Customer Code to expand the number of 

arbitrators on each list (public, nonpublic, and public chairperson) 

generated through NLSS from eight 

arbitrators to 10 arbitrators. Thus, in 

every two party case, at least two 

arbitrators would remain on each list 

after strikes.6 The additional number of 

arbitrators will increase the likelihood 

that the parties will get panelists they 

chose and ranked, even when FINRA 

must appoint a replacement arbitrator. 

In cases with more than two parties, 

expanding the lists from eight to 10 

arbitrators should significantly reduce 

the number of arbitrator appointments 

needed from extended lists.7

FINRA is also proposing to amend 

Rule 13403 of the Industry Code to 

expand the number of arbitrators on 

lists generated through NLSS.8 For 

disputes between members, FINRA 

would expand the number of arbitrators 

on the non-public chairperson list 

generated through NLSS from eight 

arbitrators to 10 arbitrators and the 

number of arbitrators on the non-public 

list from 16 arbitrators to 20 arbitrators. 

For disputes between associated 

persons, or between or among members 

and associated persons, FINRA would 

expand the number of arbitrators on 

each list (public, non-public, and public 

chairperson) generated through NLSS 

from eight arbitrators to 10 arbitrators. 

FINRA considered whether increasing 

each list of arbitrators would be unduly 

burdensome for parties since parties 

would be reviewing the backgrounds of 

additional arbitrators during the ranking 

and striking stage of the arbitrator 

appointment process. In instances 

where FINRA appoints arbitrators by 

extended lists, parties still need to 

review arbitrators’ backgrounds to 

determine, for example, whether to 

challenge an extended list arbitrator for 

cause. 

FINRA staff discussed expanding the 

lists with both investor and industry 

representatives, and asked the 

representatives to address the potential 

burden of reviewing additional 

arbitrators. The representatives 

uniformly stated that they would prefer 

to review additional arbitrators at the 

ranking and striking stage of the 

arbitrator appointment process in order 

to reduce the incidences of extended list 

appointments. 

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. Forum users have 

criticized extended list appointments 

and asked FINRA to reduce the number 

of arbitrators appointed in this way. 

Expanding the number of arbitrators on 

lists generated through NLSS would 

reduce extended list appointments and 

would provide parties with more 

control in the arbitrator selection 

process because of the increased 

likelihood that arbitrators from each 

initial list would remain on the list after 

the parties complete the striking and 

ranking process. The proposal would 

enhance investor and industry 

participants’ satisfaction with the 

arbitration process. 

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 


wwoods2 on DSK1DXX6B1PROD with NOTICES_PART 1
29596 Federal Register / Vol. 75, No. 101 / Wednesday, May 26, 2010 / Notices 

10 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)(ii). 

4 17 CFR 240.19b–4(f)(2). 

5The change is similar to changes recently made 

to the rebates offered by other trading venues. See 

Securities Exchange Act Release No. 62050 (May 6, 

2010), 75 FR 27029 (May 13, 2010) (SR–ISE–2010– 

37); Securities Exchange Act Release No. 62051 

(May 6, 2010), 75 FR 27034 (May 13, 2010) (SR– 

ISE–2010–38); Securities Exchange Act Release No. 

61996 (April 28, 2010), 75 FR 23829 (May 4, 2010) 

(SR–NSX–2010–04). 

6 15 U.S.C. 78f. 

7 15 U.S.C. 78f(b)(4). 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–FINRA–2010–022 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–2010–022. 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 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–2010–022 and 

should be submitted on or before June 

16, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–12625 Filed 5–25–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62138; File No. SR– 

NASDAQ–2010–059] 

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 19, 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 14, 

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 

17, 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 

NASDAQ is proposing to modify its 

fees for orders that execute at prices 

below $1. Currently, NASDAQ charges 

0.2% (20 basis points) of the total dollar 

value of the execution to members 

accessing liquidity; provides a rebate of 

0.1% (10 basis points) of the total dollar 

value to members providing liquidity; 

and charges a fee for routing of 0.3% (30 

basis points) of the total dollar value. 

Through this filing, NASDAQ will 

modify the rebate paid to members 

providing liquidity. Specifically, the 

rebate will be $0.00009 per share 

executed for securities priced at $0.05 or 

more but less than $1, and there will be 

no rebate for securities priced at less 

than $0.05. Depending upon the price of 

the stock, the change will result in a 

decrease in the rebate in most cases but 

an increase in some cases. The change 

is designed to provide a constant per 

share rebate and to result in a closer 

alignment between the size of the rebate 

and the average quoted spread for 

securities trading below $1.5

2. Statutory Basis 

NASDAQ believes that the proposed 

rule change is consistent with the 

provisions of Section 6 of the Act,6 in 

general, and with Section 6(b)(4) of the 

Act,7 in particular, in that it provides for 

the equitable allocation of reasonable 

dues, fees and other charges among 

members and issuers and other persons 

using any facility or system which 

NASDAQ operates or controls. The 

impact of the price changes upon the 

net fees paid by a particular market 

participant will depend upon a number 

of variables, including the relative 

availability of liquidity on NASDAQ 

and other venues, the prices of the 

market participant’s quotes and orders 

relative to the national best bid and offer 

(i.e., its propensity to add or remove 

liquidity), and the types and prices of 

the securities that it trades. NASDAQ 

believes that the proposed changes are 

reasonable and equitable in that they 


wwoods2 on DSK1DXX6B1PROD with NOTICES_PART 1