52560 Federal Register / Vol. 75, No. 165 / Thursday, August 26, 2010 / Notices 

17The text of the proposed rule change is 

available on Exchange’s Web site at http:// 

nasdaqtrader.com/micro.aspx?id=PHLXfilings, on 

the Commission’s Web site at http://www.sec.gov, at 

Phlx, and at the Commission’s Public Reference 

Room. 

18 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Rule 1000(b)(14) provides in relevant part: ‘‘The 

term ‘‘professional’’ means any person or entity that 

(i) is not a broker or dealer in securities, and (ii) 

places more than 390 orders in listed options per 

day on average during a calendar month for its own 

beneficial account(s). 

4Currently, a Professional is treated in the same 

manner as an off-floor broker-dealer for purposes of 

Rules 1014(g) (except with respect to AON orders, 

which will be treated like Customer orders), 

1033(e), 1064.02 (except professional orders will be 

considered Customer orders subject to facilitation), 

and 1080.08 as well as Options Floor Procedure 

Advices B–6, B–11 and F–5. Member organizations 

must indicate whether orders are for professionals. 

5The Cancellation Fee [sic] to member 

organizations that submit a minimum of 500 

Customer orders in a given month, and to 

Professionals that submit a minimum of 500 AON 

orders in a given month. For purposes of assessing 

the Cancellation Fee, Customer or Professional 

AON orders from the same member organization in 

the same series on the same side of the market that 

are executed at the same price within a 300 second 

period will be aggregated and counted as one 

executed option order. 

6See SR–Phlx–2010–105. 

7Electronically delivered orders are delivered 

through the Exchange’s options trading platform 

known as PHLX XL II. 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2010–105. 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,17 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 

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–Phlx– 

2010–105 and should be submitted on 

or before September 16, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–21177 Filed 8–25–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62745; File No. SR–Phlx– 

2010–113] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX, Inc.; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to the 

Cancellation Fee 

August 19, 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 August 

17, 2010, NASDAQ OMX PHLX, Inc. 

(‘‘Phlx’’ or ‘‘Exchange’’) 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 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 amend its 

Fee Schedule to modify the current 

method of calculating the minimum 

number of orders submitted by a 

member organization and subsequently 

cancelled that is required to assess a 

Cancellation Fee on electronically 

delivered Customer orders, and 

Professional3 all-or-none (‘‘AON’’) orders 

that are submitted by the member. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://nasdaqtrader.com/ 

micro.aspx?id=PHLXfilings, at the 

principal office of the Exchange, 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 

The purpose of the proposed rule 

change is to amend the manner in 

which the Cancellation Fee is assessed 

on member organizations. Currently, the 

Exchange assesses the Cancellation Fee 

on member organizations that submit 

Customer orders and Professional AON 

orders if the aggregate number of 

Customer orders and Professional AON 

orders submitted by such members and 

then cancelled totals 500 orders or more 

in a particular calendar month (the ‘‘500 

Order Threshold’’). 

The Exchange proposes to modify the 

calculation of the 500 Order Threshold 

by creating two separate Cancellation 

Fee calculations, one applicable to 

Customer orders and one applicable to 

AON orders that are submitted by a 

Professional.4 Under the proposal, the 

500 Order Threshold would be 

calculated for Customer orders and 

Professional AON orders separately, and 

would not be aggregated.5 The Exchange 

proposes this rule change to simplify 

the calculation of the 500 Order 

Threshold. 

The Exchange recently amended the 

Cancellation Fee to include Professional 

AON orders in the computation of the 

500 Order Threshold for the application 

of the Cancellation Fee.6 Currently, the 

Exchange assesses a Cancellation Fee of 

$2.10 per Customer order and $1.10 per 

Professional AON order for each 

cancelled electronically delivered 7

Customer order or Professional AON 

order that exceeds the aggregate number 

of Customer and Professional AON 

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Federal Register / Vol. 75, No. 165 / Thursday, August 26, 2010 / Notices 52561 

8For purposes of assessing the Cancellation Fee, 

Customer or Professional AON orders from the 

same member organization in the same series on the 

same side of the market that are executed at the 

same price within a 300 second period will be 

aggregated and counted as one executed option 

order. 

9The designation ‘‘simple cancel’’ indicates that 

an order is to be cancelled. 

10A cancel-replacement order is a contingency 

order consisting of two or more parts which require 

the immediate cancellation of a previously received 

order prior to the replacement of a new order with 

new terms and conditions. If the previously placed 

order is already filled partially or in its entirety the 

replacement order is automatically canceled or 

reduced by such number. See Exchange Rule 

1066(c)(7). 

11See Securities Exchange Act Release Nos. 

53226 (February 3, 2006), 71 FR 7602 (February 13, 

2006) (SR–Phlx–2005–92); and 53670 (April 18, 

2006), 71 FR 21087 (April 24, 2006) (SR–PHLX– 

2006–21). See also Securities Exchange Act Release 

No. 60046 (June 4, 2009), 74 FR 28083 (June 12, 

2009) (SR–Phlx–2009–44). 

12A complex order is a spread, straddle, 

combination, ratio or collar order, all of which 

consist of more than one component, priced like a 

single order at a net debit or credit based on the 

prices of the individual components. See Exchange 

Rule 1080.08 Commentary .08(a)(i). 

13An Immediate-or-Cancel (IOC) order is a limit 

order that is to be executed in whole or in part upon 

receipt. Any portion not so executed shall be 

cancelled. 

14E-mail from Angela Saccomandi Dunn, 

Assistant General Counsel, Phlx to Ronesha A. 

Butler, Special Counsel, Division of Trading and 

Markets dated August 19, 2010. 

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

16 15 U.S.C. 78f(b)(4). 

17 15 U.S.C. 78s(b)(3)(A)(ii). 

18 17 CFR 19b–4(f)(2). 

19The text of the proposed rule change is 

available on Exchange’s Web site at http:// 

nasdaqtrader.com/micro.aspx?id=PHLXfilings, on 

the Commission’s Web site at http://www.sec.gov, at 

Phlx, and at the Commission’s Public Reference 

Room. 

orders executed on the Exchange by that 

member organization in a given month. 

The Cancellation Fee is not assessed in 

a month in which fewer than 500 

electronically delivered Customer or 

Professional AON orders 8 are cancelled. 

Further, simple cancels 9 and cancelreplacement 10 orders are types of orders 

that are counted when calculating the 

number of electronically delivered 

orders. The following order activity is 

exempt from the Cancellation Fee: (i) 

Pre-market cancellations; 11 (ii) Complex 

Orders 12 that are submitted 

electronically; (iii) unexecuted 

Immediate-or-Cancel 13 Customer 

orders; and (iv) cancelled Customer 

orders that improved the Exchange’s 

prevailing bid or offer (PBBO) market at 

the time the Customer orders were 

received by the Exchange. 

The Exchange proposes to amend its 

Cancellation Fee to separately compute 

a Customer Cancellation Fee and a 

Professional AON Cancellation Fee. 

Each fee will be separately aggregated 

and each 500 Order Threshold will be 

calculated separately. Therefore, a 

member organization will not be 

assessed a fee on the first 500 cancelled 

Customer orders which meet the criteria 

specified above for inclusion in the 

Cancellation Fee. Similarly, a member 

organization will not be assessed a fee 

on the first 500 cancelled Professional 

AON orders which meet the criteria 

specified above for inclusion in the 

Cancellation Fee. The Exchange is not 

amending the method by which the 

Cancellation Fee is calculated; it is 

simply creating two separate 500 Order 

Threshold calculations. This 

amendment allows member 

organizations additional latitude in 

cancelling both Customer and 

Professional AON orders before 

incurring a fee for such cancellation. 

The Exchange is also proposing to 

make minor technical amendments that 

are grammatical in nature to the 

language of the Fee Schedule, relating to 

the Cancellation Fee, solely for purposes 

of clarification.14

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Fee Schedule is 

consistent with Section 6(b) of the Act 15

in general, and furthers the objectives of 

Section 6(b)(4) of the Act 16 in 

particular, in that it is an equitable 

allocation of reasonable fees and other 

charges among Exchange members and 

other persons using its facilities. The 

Exchange believes that the proposed 

amendments to the Cancellation Fee are 

reasonable because they will continue to 

ease system congestion and allow the 

Exchange to recover costs associated 

with excessive order cancellation 

activity. The Exchange believes that by 

separately calculating Customer and 

Professional AON cancellations for 

purposes of the Cancellation Fee will 

simplify the calculation of this fee. 

The Exchange believes that the 

amendment to the Cancellation Fee is 

equitable because it will afford member 

organizations the opportunity to cancel 

additional Customer and Professional 

AON orders before a fee is incurred by 

the member organization. The Exchange 

would continue to assess the 

Cancellation Fee only after the 500 

Order Threshold is reached for both 

Customer and Professional AON 

cancelled orders. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition 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 

No written comments were either 

solicited or received. 

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)(A)(ii) of the Act 17 and Rule 

19b–4(f)(2) 18 thereunder. At any time 

within 60 days of the filing of such 

proposed rule change, the Commission 

summarily may temporarily suspend 

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–Phlx–2010–113 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–Phlx–2010–113. 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,19 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 

mstockstill on DSKH9S0YB1PROD with NOTICES

52562 Federal Register / Vol. 75, No. 165 / Thursday, August 26, 2010 / Notices 

20 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The current FINRA rulebook consists of (1) 

FINRA Rules; (2) NASD Rules; and (3) rules 

incorporated from NYSE (‘‘Incorporated NYSE 

Rules’’) (together, the NASD Rules and Incorporated 

NYSE Rules are referred to as the ‘‘Transitional 

Rulebook’’). While the NASD Rules generally apply 

to all FINRA members, the Incorporated NYSE 

Rules apply only to those members of FINRA that 

are also members of the NYSE (‘‘Dual Members’’). 

The FINRA Rules apply to all FINRA members, 

unless such rules have a more limited application 

by their terms. For more information about the 

rulebook consolidation process, see Information 

Notice, March 12, 2008 (Rulebook Consolidation 

Process). 

4For convenience, the Incorporated NYSE Rules 

are referred to as the NYSE Rules. 

5FINRA notes that NYSE Rule 405(4) was 

eliminated from the Transitional Rulebook on June 

14, 2010 pursuant to a previous rule filing. See 

Securities Exchange Act Release No. 61808 (March 

31, 2010), 75 FR 17456 (April 6, 2010) (Order 

Approving File No. SR–FINRA–2010–005); see also 

Regulatory Notice 10–21 (April 2010). 

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 

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–Phlx– 

2010–113 and should be submitted on 

or before September 16, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–21178 Filed 8–25–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62718A; File No. SR– 

FINRA–2010–039] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change To Adopt 

FINRA Rules 2090 (Know Your 

Customer) and 2111 (Suitability) in the 

Consolidated FINRA Rulebook; 

Correction 

August 20, 2010. 

Need for Correction 

On August 13, 2010, the Commission 

published (and sent to the Federal 

Register for publication) Release No. 

34–62718—a Notice that the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) had proposed rule changes to 

adopt FINRA Rules 2090 and 2111 (the 

‘‘August 13 Notice’’). On August 18, 

2010, Commission staff discovered that 

several footnote cross-references in the 

August 13 Notice were inaccurate. The 

staff believes this was the result of its 

reorganization of the discussion of the 

rules to parallel the numerical order of 

those rules. 

This correction does not substantively 

amend the August 13 Notice. The sole 

purpose of this correction is to rectify 

the footnote errors and alleviate any 

resulting confusion. As the number of 

footnotes affected is significant, the 

entire August 13 Notice is being 

republished with corrected footnotes. 

Correction of Publication 

Accordingly, the August 13 Notice is 

republished in whole to correct certain 

footnotes and footnote cross-references 

as follows: 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62718; File No. SR–FINRA– 

2010–039] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change To Adopt 

FINRA Rules 2090 (Know Your 

Customer) and 2111 (Suitability) in the 

Consolidated FINRA Rulebook 

August 13, 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 July 30, 

2010, 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 and 

II below, which Items substantially have 

been 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 adopt FINRA 

Rule 2090 (Know Your Customer) and 

FINRA Rule 2111 (Suitability) as part of 

the Consolidated FINRA Rulebook. The 

proposed rules are based in large part on 

Incorporated NYSE Rule 405(1) 

(Diligence as to Accounts) and, NASD 

Rule 2310 (Recommendations to 

Customers (Suitability)) and its related 

Interpretative Materials (‘‘IMs’’) 

respectively. As further detailed herein, 

the proposed rule change would delete 

those NASD and Incorporated NYSE 

rules and related NASD IMs and 

Incorporated NYSE Rule Interpretations. 

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. 

In addition, the text of the proposed rule 

change is included as Exhibit 5 on the 

Commission’s Web site at: http:// 

www.sec.gov/rules/sro/finra.shtml, 

under the heading SR–FINRA–2010– 

039. 

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 

As part of the process of developing 

a new consolidated rulebook 

(‘‘Consolidated FINRA Rulebook’’),3

FINRA is proposing to adopt FINRA 

Rule 2090 (Know Your Customer) and 

FINRA Rule 2111 (Suitability). The 

rules are based in large part on NYSE 

Rule 405(1) (Diligence as to Accounts) 

and NASD Rule 2310 

(Recommendations to Customers 

(Suitability)) and its related IMs, 

respectively.4 As further discussed 

below, the proposed rule change would 

delete NASD Rule 2310, IM–2310–1 

(Possible Application of SEC Rules 15g– 

1 through 15g–9), IM–2310–2 (Fair 

Dealing with Customers), IM–2310–3 

(Suitability Obligations to Institutional 

Customers), NYSE Rule 405(1) through 

(3) (including NYSE Supplementary 

Material 405.10 through .30), and NYSE 

Rule Interpretations 405/01 through/ 

04.5

mstockstill on DSKH9S0YB1PROD with NOTICES