32526 Federal Register / Vol. 75, No. 109 / Tuesday, June 8, 2010 / Notices 

debtor’s financial condition, and possible criminal 

prosecution for intentionally inaccurate disclosures, 

among other aspects, distinguish bankruptcy from 

inability-to-pay. 

11See Toney L. Reed, 52 S.E.C. 944 (1996), 

recons. denied, Securities Exchange Act Release No. 

39354 (Nov. 25, 1997); Bruce M. Zipper, 51 S.E.C. 

928 (1993). In addition, the SEC had previously 

recognized that a bona fide inability-to-pay an 

arbitration award is an important consideration in 

determining whether any sanction for failing to pay 

an arbitration award is ‘‘excessive or oppressive.’’ 

See Securities Exchange Act Release No. 40026 

(May 26, 1998), 63 FR 30789 (June 5, 1998). 

(Without further discussion, the order cited the 

SEC’s decision in Zipper, which was a disciplinary 

case, not an expedited action.) 

12 In William J. Gallagher, Securities Exchange 

Act Release No. 47501 (March 14, 2003), the SEC 

emphasized that expedited actions are reviewed 

under Section 19(f) of the Act not Section 19(e). The 

SEC stated, ‘‘Gallagher misconstrues the applicable 

review standard when he argues that [FINRA’s] 

sanction is ‘excessive and oppressive’ and that 

[FINRA’s] indefinite suspension order is 

inconsistent with the [FINRA] Sanction Guidelines, 

standards relevant in the Commission’s review of 

[FINRA] disciplinary proceedings under Section 

19(e) of the Exchange Act.’’ Id. at *6. The SEC 

explained that its review is limited to analyzing 

whether ‘‘the specific ground on which [FINRA] 

based its suspension—failure to pay in full an 

arbitration award—‘exists in fact[,]’’’ the ‘‘SRO’s 

determination was in accordance with its rules, and 

* * * those rules are, and were applied in a 

manner, consistent with the purposes of the 

Exchange Act.’’ Id. at *5 & *7. In Gallagher, FINRA 

and the SEC rejected the respondent’s claim of 

inability-to-pay on factual grounds. The issue of 

whether a respondent was permitted to raise the 

defense as a matter of law was neither raised nor 

decided. 

13 In its comment, PIABA also recommended that 

FINRA eliminate or restrict the bankruptcy defense 

in expedited proceedings. Those suggestions are 

outside the scope of the current proposed rule 

change. 14 In approving the proposed rule change, the 

Commission has considered the rule change’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

15 15 U.S.C. 78o–3(b)(6). 

16 15 U.S.C. 78o–3(b)(7). 

17 15 U.S.C. 78s(b)(2). 

18 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

The inability-to-pay defense emerged 

from a series of SEC decisions that 

require FINRA to consider the defense 

in disciplinary cases (as opposed to 

expedited actions), including 

disciplinary cases involving failures to 

pay arbitration awards and restitution.11

The legal underpinnings that support 

the inability-to-pay defense in 

disciplinary cases are not, however, 

present in the expedited proceedings 

context. The aforementioned SEC 

decisions largely rely on the ‘‘excessive 

and oppressive’’ language in Section 

19(e) of the Exchange Act in requiring 

FINRA to consider inability-to-pay. 

Section 19(e) of the Exchange Act 

provides authority to the SEC to review 

and affirm, modify or set aside any final 

disciplinary sanctions imposed by 

FINRA on its members. Section 19(e), 

however, does not apply to expedited 

proceedings. Expedited proceedings are 

reviewed under Exchange Act Section 

19(f), which requires that ‘‘the specific 

grounds’’ on which FINRA based its 

action ‘‘exist in fact,’’ that FINRA 

followed its rules, and that those rules 

are consistent with the Act. The 

different focus of these two standards 

and the more limited review for 

expedited actions are understandable 

and support eliminating the inability-topay defense in expedited actions.12

Unlike in disciplinary cases, FINRA is 

not imposing a monetary sanction in 

these expedited actions; it is suspending 

a respondent for failing to pay a 

previously imposed arbitration award. 

There also is an explicit procedural 

mechanism built into these expedited 

actions that allows a suspension to be 

lifted once respondents satisfy any of 

the four defenses listed above. The main 

goal is to encourage respondents to 

comply with the law or previously 

imposed orders, not to sanction them for 

past misconduct. 

In sum, members and associated 

persons that fail to pay arbitration 

awards to customers should not be 

allowed to remain in the securities 

industry by relying on the inability-topay defense in expedited actions. This 

is especially true because they can avoid 

regulatory action by paying the award, 

reaching a settlement with the 

customers (which can include payment 

plans), moving to vacate the award, or 

filing for bankruptcy. Three commenters 

addressed the proposed rule change and 

all three urged the Commission to 

approve it.13

II. Discussion and Commission 

Findings 

After careful review, the Commission 

finds the proposed rule change to be 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities association.14 In particular, 

the Commission finds that the proposed 

rule change is consistent with the 

provisions of Section 15A(b)(6) of the 

Act,15 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; to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system; and, in general, to protect 

investors and the public interest. The 

proposal also is consistent with Section 

15A(b)(7) of the Act,16 which provides 

that FINRA must take appropriate action 

when members and associated persons 

violate provisions of the Act or FINRA 

rules. 

The Commission believes that the 

proposed rule change will further 

FINRA’s investor protection mandate by 

promoting a fair and efficient process 

for taking action to encourage members 

and associated persons to pay 

arbitration awards to customers. The 

Commission also believes that the 

proposed rule change will further 

FINRA’s statutory obligation to take 

appropriate action when members and 

associated persons violate provisions of 

the Act or FINRA rules. 

III. Conclusion 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change is consistent with the Act 

and the rules and regulations 

thereunder applicable to a national 

securities association. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,17 that the 

proposed rule change (SR–FINRA– 

2010–0014) be and hereby is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–13764 Filed 6–7–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62207; File No. SR–ISE– 

2010–55] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Relating to Amending the 

Direct Edge ECN Fee Schedule 

June 2, 2010. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on May 28, 

2010, the International Securities 

Exchange, LLC (the ‘‘Exchange’’ or the 

‘‘ISE’’) 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 the selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 


emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 109 / Tuesday, June 8, 2010 / Notices 32527 

3References to ISE Members in this filing refer to 

DECN Subscribers who are ISE Members. 

4This fee filing relates to the trading facility 

operated by ISE and not EDGA Exchange, Inc. and 

EDGX Exchange, Inc. Direct Edge ECN LLC (EDGA 

and EDGX) will cease to operate in its capacity as 

an electronic communications network following 

the commencement of operations of EDGA 

Exchange, Inc. and EDGX Exchange, Inc. as national 

securities exchanges. 

5See Securities Exchange Act Release No. 62050 

(May 6, 2010), 75 FR 27029 (May 13, 2010) (SR– 

ISE–2010–37). 

6 15 U.S.C. 78f. 

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

8 15 U.S.C. 78s(b)(3)(A). [sic] 

9 17 CFR 19b–4(f)(2). 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Direct Edge ECN’s (‘‘DECN’’) fee 

schedule for ISE Members 3 to pass 

through rebates/fees from other market 

centers. All of the changes described 

herein are applicable to ISE Members. 

The text of the proposed rule change 

is available on the Exchange’s Internet 

Web site at http://www.ise.com, on the 

Commission’s Internet Web site at 

http://www.sec.gov, at ISE, 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 

self-regulatory organization 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 self-regulatory organization 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 

DECN, a facility of ISE, operates two 

trading platforms, EDGX and EDGA.4

On May 1, 2010,5 the Exchange 

amended the fees for orders that either 

route or re-route to the NYSE in 

response to an increase in NYSE’s fee 

for removing liquidity to $0.0021 per 

share (from $0.0018 per share). As part 

of that amendment, the ‘‘Q’’ flag, which 

denotes an order type (ROUC) that 

routes to the NYSE, was increased from 

$0.0015 per share to $0.0018 per share 

on EDGA and EDGX to reflect the 

increase. To more closely reflect the 

costs of removing liquidity from the 

NYSE, the ‘‘Q’’ flag is now proposed to 

be further increased from $0.0018 to 

$0.0020 per share. 

The changes discussed in this filing 

will become operative on June 1, 2010. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the objectives of Section 6 of the Act,6

in general, and furthers the objectives of 

Section 6(b)(4),7 in particular, as it is 

designed to provide for the equitable 

allocation of reasonable dues, fees and 

other charges among its members and 

other persons using its facilities. ISE 

notes that DECN operates in a highly 

competitive market in which market 

participants can readily direct order 

flow to competing venues if they deem 

fee levels at a particular venue to be 

excessive. The proposed rule change 

reflects a competitive pricing structure 

designed to incent market participants 

to direct their order flow to DECN. ISE 

believes the fees and credits remain 

competitive with those charged by other 

venues and therefore continue to be 

reasonable and equitably allocated to 

those members that opt to direct orders 

to DECN rather than competing venues. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

impose 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 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

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

the Act 8 and Rule 19b–4(f)(2)9

thereunder. At any time within 60 days 

of the filing of such 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–ISE–2010–55 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–ISE–2010–55. 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 

ISE. 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–ISE–2010–55 and should be 

submitted on or before June 29, 2010. 


emcdonald on DSK2BSOYB1PROD with NOTICES
32528 Federal Register / Vol. 75, No. 109 / Tuesday, June 8, 2010 / Notices 

10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3This fee filing relates to the trading facility 

operated by ISE and not EDGA Exchange, Inc. and 

EDGX Exchange, Inc. Direct Edge ECN LLC (EDGA 

and EDGX) will cease to operate in its capacity as 

an electronic communications network following 

the commencement of operations of EDGA 

Exchange, Inc. and EDGX Exchange, Inc. as national 

securities exchanges. 

4References to ISE Members in this filing refer to 

DECN Subscribers who are ISE Members. 

5On June 1, 2010, in SR–ISE–2010–55, the 

Exchange increased the ‘‘Q’’ flag from $0.0018 to 

$0.0020 per share to more closely reflect the costs 

of removing liquidity from the NYSE. By way of 

background, on May 1, 2010, in SR–ISE–2010–37, 

the Exchange amended the fees for orders that 

either route or re-route to the NYSE in response to 

an increase in NYSE’s fee for removing liquidity to 

$0.0021 per share (from $0.0018 per share). As part 

of that amendment, the ‘‘Q’’ flag, which denotes an 

order type (ROUC) that routes to the NYSE, was 

increased from $0.0015 per share to $0.0018 per 

share on EDGA and EDGX to reflect the increase. 

See Securities Exchange Act Release No. 62050 

(May 6, 2010), 75 FR 27029 (May 13, 2010) (SR– 

ISE–2010–37). 

6 15 U.S.C. 78f. 

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

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–13766 Filed 6–7–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62206; File No. SR–ISE– 

2010–56] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Order 

Granting Accelerated Approval to a 

Proposed Rule Change Relating to the 

Amounts That Direct Edge ECN, in Its 

Capacity as an Introducing Broker for 

Non-ISE Members, Passes Through to 

Such Non-ISE Members 

June 2, 2010. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on May 28, 

2010, the International Securities 

Exchange, LLC (the ‘‘Exchange’’ or the 

‘‘ISE’’) 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 the selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons, and is 

approving the proposal on an 

accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to modify the 

amounts that Direct Edge ECN 

(‘‘DECN’’), in its capacity as an 

introducing broker for non-ISE 

Members, passes through to such nonISE Members. 

The text of the proposed rule change 

is available on the Exchange’s Internet 

Web site at 

http://www.ise.com, on the 

Commission’s Internet Web site at 

http://www.sec.gov, at ISE, 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 

self-regulatory organization 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 III below. 

The self-regulatory organization 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 

DECN, a facility of ISE, operates two 

trading platforms, EDGX and EDGA.3

On May xx, [sic] 2010, the ISE filed for 

immediate effectiveness a proposed rule 

change to amend Direct Edge ECN’s 

(‘‘DECN’’) fee schedule for ISE 

Members 4 to pass through charges from 

other market centers.5 The changes 

made pursuant to SR–ISE–2010–55 

became operative on June 1, 2010. 

In its capacity as a member of ISE, 

DECN currently serves as an introducing 

broker for the non-ISE Member 

subscribers of DECN to access EDGX 

and EDGA. DECN, as an ISE Member 

and introducing broker, receives rebates 

and is assessed charges from DECN for 

transactions it executes on EDGX or 

EDGA in its capacity as introducing 

broker for non-ISE Members. Since the 

amounts of charges were changed 

pursuant to SR–ISE–2010–55, DECN 

wishes to make corresponding changes 

to the amounts it passes through to nonISE Member subscribers of DECN for 

which it acts as introducing broker. As 

a result, the per share amounts that nonISE Member subscribers receive and are 

charged will be the same as the amounts 

that ISE Members receive and are 

charged. 

ISE is seeking accelerated approval of 

this proposed rule change, as well an 

effective date of June 1, 2010. ISE 

represents that this proposal will ensure 

that both ISE Members and non-ISE 

Members (by virtue of the pass-through 

described above) will in effect be 

charged equivalent amounts and that 

the imposition of such amounts will 

begin on the same June 1, 2010, start 

date. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the objectives of Section 6 of the Act,6

in general, and furthers the objectives of 

Section 6(b)(4),7 in particular, in that it 

is designed to provide for the equitable 

allocation of reasonable dues, fees and 

other charges among its members and 

other persons using its facilities. In 

particular, this proposal will ensure that 

dues, fees and other charges imposed on 

ISE Members are equitably allocated to 

both ISE Members and non-ISE 

Members (by virtue of the pass-through 

described above). 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

impose 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 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

III. 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 


emcdonald on DSK2BSOYB1PROD with NOTICES